We use household-level data covering a ten-year period (1984-1993) to investigate the likely determinants of the Italian 1993 recession - the first year since World War II in which private consumption contracted.
Consumption fell for most working-age households and for the self-employed. Our evidence is consistent with the response to permanent negative shocks due to the far-reaching pension reform of 1992 and the introduction of stricter tax compliance measures for the self-employed. This is still true when we control for the role of job losses and the collapse of the retail sector that characterised the early 1990s.
Paper presented at the IFS-Banco de Portugal Conference on "Savings and Consumption Growth" (Estoril, November 1995), at the VSB-TMR Savings Workshop (Tilburg, July 1996) and to seminar audiences at Banca d'ltalia, Universita di Bologna and Universita di Padova.
