Are stressed consumers spending more or less?
Date & time
This paper examines the impact of consumer stress on current and expected spending. Using two representative Australian household surveys, we find that increased stress leads to an increase in consumer spending suggesting that consumers use consumption to cope with the negative emotions that arise from stress. We distinguish between mental distress and financial stress and find that both put upward pressure on spending. The finding that financial stress leads to a rise in spending is surprising and implies that the psychological component of the financial stress outweighs the economic component. Although financially strained, consumers use consumption as a coping strategy to regulate the negative emotions that arise from the stress. We also separate consumers with an optimistic outlook about general economic activity from those with a pessimistic outlook and find optimists spend and plan to spend more than pessimists and this effect is largest for stressed consumers.
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