The Impact of Unemployment on Employed Households

Unemployment is a common but alarming phenomenon in our country's economy that brought about many social and economic problems. The paper attempts to investigate one of the economic harms caused by unemployment that has been less studied. It seems that not only unemployment affects the consumption of unemployed households, but it also affects employed households. in the way that unemployment, as a modifying factor of income expectations, affects household consumption. To study this issue, this article attempted to specify a formula for consumption based on economic theories and estimated its coefficients through using household income-expenditure data provided by the Statistical Center of Iran and employing panel data method. Results indicate that households, in the face of rising unemployment at the community level, reduce their consumption by 1. 5% in response to one percent increase in unemployment rate. Moreover, their share of food consumption increase while the share of nonfood expenditures tends to fall.
JEL Classification: D12، D82، J64، D84، C23