Household Health Largely Immune to National Economic Shocks, Study Finds (8/26/2008)

Researchers find that families adapt household spending to economic crises.

When a national financial crisis strikes, ordinary citizens are adept at mitigating its effects on their health and long-term well-being by adapting their household spending, according to a study by researchers at the Motu Economic and Public Policy Research institute in New Zealand and Duke University.

The study, "Nutritional Status during an Economic Crisis: Evidence from Russia," was published online Tuesday, Aug. 19, 2008, in The Economic Journal. The findings have implications for how governments and international donors respond to large-scale shocks, such as financial crises, said the study's authors, Steven Stillman, a senior fellow at Motu Research, and Duncan Thomas, a Duke economics professor.

"If there is a major economic crisis, policymakers are under pressure to respond. The appropriate immediate response is not necessarily to blanket the entire country with resources, be it income or subsidized food, but to target resources to those people who need them the most," Stillman said. "Apparently, the average person is able to do quite well in the face of economic shocks that are relatively short-lived."

In their study, Stillman and Thomas examine patterns of spending and food consumption among Russians between 1996 and 2000 using population-based data on about 18,000 people interviewed in the Russia Longitudinal Monitoring Survey. From 1996 to 1998, economic turmoil sent average Russian household incomes plummeting 40 percent; incomes more than fully rebounded by 2000.

The researchers found that while household spending on food declined then rose in line with income, the average family's intake of calories changed little during the four years. Families accomplished this by relying more on lower-cost, higher-calorie foods during economically difficult times.

"Quantities of starches and dairy are essentially unchanged across the entire sample period. In contrast, fruit and vegetables consumption appears to have adjusted entirely (to income variation) in terms of quantities," the researchers explained in their paper. "In the case of meat, however, the picture is more nuanced: expenditures declined throughout the 1990s with a large decline in 1998; in 2000, expenditures rose but remained below their level in the mid-1990s."

The study also looked at adult weight and child height as indicators of nutrition, and found that they changed little in response to income variation.

"Overall, the evidence suggests that individuals and households are very resilient -- even in the face of major economic upheavals -- and that they optimize over many dimensions of well-being," the study concludes.

"The kind of household adaptability we find in the emerging economy of Russia could be applied to more advanced (nations) and to developing nations as well," Thomas said. "We would expect American households to make similar lifestyle changes in response to rising gas and food prices and we have seen similar responses to the Asian economic crisis by Indonesian families."

Note: This story has been adapted from a news release issued by Duke University

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