The Resilience of Entertainment Over Business Cycles

There are several economic, political, social, and psychological factors that motivate consumers' spending decisions. Whatever the motivations, consumer expenditure makes up one of the most crucial aspects of the economy. While consumers hold power in the economy, they are also vulnerable to shifts in business cycles over time. In the past several decades there have been significant depression, recession, and expansion. The impact of these cycles on consumers is quite nuanced and has been studied on aggregate. In this paper, I contribute to the literature by assessing the heterogeneous effect of business cycles on different sectors of consumer expenditure on both a macroeconomic and microeconomic level. I focus on consumer expenditure on entertainment, while comparing it to a baseline of consumer spending on durables. There is also a persistent question about which, if any, industries are resilient to changes in business cycles. Do "recession-proof" industries exist? Consumption of entertainment and leisure goods have been suspected to either be unaffected by recession or see an increase in consumption in times of economic downturn. This paper makes crucial strides in explaining substitution effects and changes in marginal utility in the face of economic expansion and contraction. By regressing consumer expenditure on entertainment and certain specific entertainment purchases on Gross Domestic Product and unemployment rate, I explore to what extent overall economic health dictates consumption of such leisure goods. I also examine the effect of business cycles over time on consumption of non-entertainment goods, in order to make conclusions about the heterogeneity of consumer spending across business cycles. I find that households increase their consumption of entertainment as a proportion of total expenditure as unemployment rises and GDP falls, even as total expenditure decreases.

Union College Schaffer Library Digital Projects

Union College Schaffer Library Special Collections, 807 Union St., Schenectady, NY 12308; 518-388-6620; https://www.union.edu/schaffer-library

Union College (Schenectady, N.Y.). Department of Economics