Job Loss, Credit Constraints and Consumption Growth
AbstractWe use direct evidence on credit constraints to study their importance for household consumption growth and for welfare. We distentangle the direct effect on consumption growth of a currently binding credit constraint from the indirect effect of a potentially binding credit constraint which generates consumption risk. Our data is focused on job losers. We find that less than 5% of job losers experience a binding credit constraint, but for those that do, they experience significant welfare losses, and consumption growth is 24% higher than for the rest of the population. However, even among those who are currently unconstrained and who are able to borrow if needed, consumption responds to transitory income.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1223.
Date of creation: 04 May 2012
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Web page: http://www.econ.cam.ac.uk/index.htm
Job Loss; Credit Constraints; Consumption;
Other versions of this item:
- Thomas F. Crossley & Hamish W. Low (corresponding author), 2011. "Job Loss, Credit Constraints and Consumption Growth," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1126, Koc University-TUSIAD Economic Research Forum.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
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