Deriving shocks to household consumption expenditures from the associated income shocks resulting from COVID-19
This note, which forms part of a series of technical notes that complement Lastunen et al. (2021), reports the approach used to derive shocks to household expenditures from shocks at the individual-level labour incomes. Its structure is composed by six different parts that describe the technique used for the calculations and include the respective mathematical formulas.
Through the sequence of formulas, we manage to calculate household expenditures from shocks at the individual-level labour incomes by firstly distributing the expenditures of a given household among people within the same household. We then calculate the own-account adjusted expenditure. Subsequently, we obtain the final expenditure by deriving the share of labour income vis-a-vis the total original income for each person and multiplying it by the own-account adjusted expenditure. Lastly, we sum up shocked individual expenditures within each household to derive shocked expenditures at the household level.