International Research Journal of Education and Technology

India has recorded high levels of unemployment and low labor force participation rates in recent years even earlier than the onset of the COVID-19 pandemic and the lockdown. How does an episode of unemployment or loss of earnings affect family consumption expenditure is an important query for designing powerful protection nets. We use data on household-precise episodes of job loss and decline in income, from an in advance year (March-April 2019) to estimate the family response to employment shocks. We apply diff-in-diff and quantile regressions to a high-frequency panel records from a nationally representative survey of 1,75,000 households to estimate the impact of a job loss (and trade in income) on family intake expenditure—for urban and rural families, and households across one of a kind expenditure levels. We find that loss of employment of an earning member leads to a massive instant decline in household consumption expenditure. The decline is much larger for urban households and families in the lowest and the maximum deciles of month-to-month according to capita consumption expenditure. long lasting expenses go down the most. Expenditure on health and education additionally is going down drastically and there is evidence of changes in discretionary expenses too, specially for city households. For households with only one earning member, borrowing does no longer growth after the job loss, suggesting credit constraints. government cash transfers assist rural families, as the beneficiaries show a smaller discount in consumption expenditure after the shock. Our findings highlight the high vulnerability of urban families to financial shocks and can inform the design and focused on of income support and other safety-net programs in India and different developing nations.

Key Words: employment  shock, consumption smoothing, permanent  income  hypothesis, direct  cash transfers, credit  constraints, consumer  spending.