Changes in household behaviour in times of political instability : a study from South Africa

Abstract

Background and Setting: South Africa’s recent economic climate has been categorised by decreased economic growth and productivity caused by poor leadership and corruption. Studies have indicated how these changes in the macro-level perceived political stability of a country have an affect on the consumption behaviour of households. These measures of political stability are usually created using a combination of macroeconomic measures or related directly to a specific national shock. Aim: The aim of this article is to investigate the relationship between individuals perceived political stability in South Africa and their household consumption behaviour. This article focuses on the construction of an individual level measure of perceived political stability and how these changes, change people’s consumption behaviour. Methods: The article makes use of panel data from the years 2008 – 2017 from the National Income Dynamics Survey. The individual perceived political stability index is created through a principal component analysis approach, and the regression analysis is completed using a Fixed Effects estimation technique. Results: The results indicate that South African consumers change consumption behaviour through average savings and expenditure on healthcare during times of political stability in the country. Conclusion: The average individual has had an increasingly negative view on the political stability of South Africa, largely dependent on the area which the individual lives and their household income. Changes in individual views in perceived political stability affect consumption behaviour in South Africa.