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Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers during the Great Recession

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  • Bernstein, Shai

    (Stanford University)

  • McQuade, Timothy James

    (Stanford University)

  • Townsend, Richard R.

    (University of California, San Diego)

Abstract

We investigate how the deterioration of household balance sheets affects worker productivity, and whether such effects mitigate or amplify economic downturns. To do so, we compare the output of innovative workers who were employed at the same firm and lived in the same area at the onset of the 2008 crisis, but who experienced different declines in housing wealth. We find that following a negative wealth shock, innovative workers become less productive, and generate lower economic value for their firms. Consistent with a financial distress channel, the effects are more pronounced among those with little home equity before the crisis and those with fewer outside labor market opportunities.

Suggested Citation

  • Bernstein, Shai & McQuade, Timothy James & Townsend, Richard R., 2018. "Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers during the Great Recession," Research Papers 3649, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3649
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    File URL: https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/436786
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    Cited by:

    1. Enrico Moretti, 2019. "The Effect of High-Tech Clusters on the Productivity of Top Inventors," NBER Working Papers 26270, National Bureau of Economic Research, Inc.

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