Panel Study of Income Dynamics (PSID) Data

We use PSID data to investigate the impact of unemployment during recession on trip expenditure. PSID, a longitudinal study conducted by the University of Michigan, began

interviewing 18,000 individuals from 5,000 families in 1968. Annual interview of this nationally

representative sample and descendants from the original families continued until 1997. After 1997, the survey was conducted on a biennial basis. The survey collected detail household information including employment, education, income, wealth, health, and expenditures, along with many other socioeconomic factors. Eventually, the surveys incorporated questions to address scientific and policy needs. The interviews always collected detail information on the household head, and spouses as well, if applicable.

To answer the research question, we draw on the data from PSID survey rounds of 2005, 2007, 2009, and 2011. We begin with 2005 because that year is the first time PSID included questions on recreation trip expenditure.³² In any survey year, PSID collects information on consumption expenditure incurred or employment status from the previous calendar year (e.g., recreation expenditure enumerated in 2009 survey was incurred by the household in 2008). In this paper, we state the expenditure or employment status by the year it took place.

The 19 calendar-month-long recession in the US, according the national Bureau of Economic Research, started in December of 2007 and ended in June of 2009. Based on those dates, the 2009 survey round exactly matches with the recession year, and represents the treatment year in our research. Although it officially ended in June of 2009, the recession was still widespread after the official end date, as the economy recovered slowly. Because of the slow recovery, households did not regain confidence to spend at pre-recession levels, which leads us to consider 2010 a recession year.

Drawing on samples from the survey rounds, we include households that provided information to conduct the analysis following empirical strategy and methods proposed in the

32 PSID asked the respondents “How much did you (and your family living there) spend altogether in 2008 on trips and vacations, including transportation, accommodations, and recreational expenses on trips?”

previous section. In the fixed-effect framework, where the fixed effect is assumed on the

households, the data requirement is minimal. Since we only need recreation trip expenditure and state identification, we include all households that provided complete information on these two items, allowing us to utilize the maximum number of survey households. Our tabulation of the data reveals that 11,387 households appear at least once with complete information on recreation trips in survey rounds from 2005 to 2011. Out of these responses, 9,123 households appear at least twice and 5,603 households appear across all four rounds with complete information on recreation expenditure. Additionally, 809 households, 8.38% of the original sample, reported a different state of residence across survey rounds. While they might be different from those not changing states, we keep them in the sample. We match these 11,387 households with the average yearly unemployment rate in their state of residence and utilize them in the fixed-effect regression analysis. The state-level yearly average unemployment rate is drawn from the Local Area Unemployment Statistics provided by the Bureau of Labor Statistics.

Figure 1 plots state-level unemployment rates, participation in recreation, and total expenditure in recreation trips for all households that provided trip expenditure information at least once. We observe an opposite movement of participation and trip expenditure against state-level unemployment rate. Figure 2, a replication of Figure 1 with households that appear in our fixed-effect exercise, depicts that both participation and average expenditure on trips across years are higher compared to the corresponding averages of those households utilized in Figure 1. In Figure 2, the pattern of movement of both participation and trip expenditure and state-level unemployment rate remains the same as in Figure 1, except in 2006, where we observe a rise in participation with a fall in the state-level unemployment rate. The pattern in Figure 1 remains unchanged if we focus only on the balanced sample comprising 5,587 households.

For the matching and difference-in-difference exercises, we include all households that provided complete information on employment status and trip-expenditure in both of the recession year and recession year, but provided complete socioeconomic factors only in the pre-recession year. The total number of treatment and control households are presented in Table 1.

Between 2006 and 2008, out of 4,627 households with complete information, 83.66% revealed that both spouses were employed in both 2006 and 2008, forming the control. Of the respondent households, 16.34% reported at least one spouse who became unemployed or retired during the recession year 2008, forming treatment group one. Treatment group one is split to form treatment group two, consisting only of those who became unemployed (11.89%), and treatment group three, consisting only of retirees (4.5%). Following a similar approach, we have a sample of 4,129 households from the years 2006 and 2010, of which 80.55% form the control group, 19.5%

form treatment group one, 11.12% form treatment group two, and 8.5% from treatment group three. Finally, between the years 2008 and 2010, 14.22% household respondents out of 4,422 became either unemployed or retired (treatment group one), 9.7% became unemployed (treatment group two), and 4.55% retired (treatment group three).³³

In the matching framework, we consider 2006 as the baseline year in the analysis of 2006 vs. 2008 and 2006 vs. 2010; while in the analysis of 2008 and 2010, we consider 2008 as the baseline year. The summary statistics of the covariate used in the baseline years of 2006 and 2008 are presented in Table 2. In our sample, household heads are, on average, 42.5 years old, and the average spousal age is 25.5 years. The sample consists of 62% white, 30% black, and

33 Note that treatment group two (unemployed) and three (retired) do not sum to treatment group one (unemployed and retired). In a few household cases, spouses experienced both retirement and unemployment. For example, a husband became unemployed while a wife retired from a fulltime employment position in the pre-recession year.

Since the percentage of such households in this sample are small, instead of discarding them, we include them in our analysis.

8% from other races, 56% are married, the average family size is 2.74, and 14% of households have children under the age of two. The schooling profile indicates that 11% of respondents did not complete high school, 28% are high school graduates, and 28% have some college education.

In our sample, approximately 76% of households reside in urban areas and 3% reside in rural areas. Around 65% of the households own a house and 93% own a vehicle. Average household wealth is a little over $200,000 but there is huge variation across households. The standard deviation of household wealth is $12.44 million USD. Most households are employed in

manufacturing, retail trade, and services sectors. The construction industry employed 7% of the households, and around 10% were employed in agriculture and public administration, two of the relatively less-affected industries during the 2009 recession. A majority of the households come from states in the southern US. The overall health status of the sample seems good—89% self-reported good health, 65% are involved in physical activities, and only 20% are smokers.

The averages of the covariates are almost the same in the baseline year of 2008, as presented in Table 2, except those on household wealth. Since, in 2008, households were already affected by the recession, we expect the average household wealth to fall. Accordingly, we observe that average household wealth in 2008 is approximately 7% lower than in 2006, and standard deviation of household wealth increases by 1.43 times in the recession year.