Household Behaviour in Ireland, Sweden, the US and the UK under Rationing

The pandemic-induced economic crisis has seen a massive build up in savings across Europe and North America as households could not spend their income as they normally would. The last time that consumers were seriously rationed was during the Second World War. This paper models the behaviour of households during the War years and its immediate aftermath in Ireland, Sweden, the US and the UK. We first estimate overall consumption and then consider how total consumption was allocated over different categories of goods, including rationed goods. The model shows that consumers saved rather than spend on available unrationed goods and services. These savings were held in liquid form and, once the War was over and rationing eased, a consumption boom transpired. However, only some of the savings were spent on previously rationed goods as significant excess savings were also converted into physical assets in the housing market. There is evidence that this pattern is being repeated as the Covid-19 crisis eases.