Borrowing During Unemployment: Unsecured Debt as a Safety Net
AbstractThis paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment-induced earnings losses. Results indicate that very low-asset households—those in the bottom decile of total assets—do not borrow in response to these shortfalls. However, other low-asset households do borrow, increasing unsecured debt by more than 11 cents per dollar of earnings lost. In contrast, wealthy households do not increase unsecured debt during unemployment. The evidence suggests that very low-asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Journal of Human Resources.
Volume (Year): 43 (2008)
Issue (Month): 2 ()
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- James X. Sullivan, 2005. "Borrowing during unemployment: unsecured debt as a safety net," Proceedings 958, Federal Reserve Bank of Chicago.
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