We measure the response of household consumption of different
income groups to social spending during the 2002-2012 period using
the aggregated Household Budget Survey Data. We find that
households respond more strongly to changes in pensions than to
changes in allowances and in-kind transfers. The very weak response
of households to changes in allowances and in-kind transfers, both of
which are transitory income, is consistent with the permanent income
hypothesis. The estimates of pension elasticities suggest that the
response of the low income group to changes in pensions is the
strongest, whereas the response of the middle income group is the
weakest. We further find that, in aggregate, households of all income
groups do not exhibit habit persistence.