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 constraints 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1126.
Length: 28 pages
Date of creation: Oct 2011
Date of revision:
Job Loss; Credit Constraints; Consumption;
Other versions of this item:
- Crossley, T. & Low, H., 2012. "Job Loss, Credit Constraints and Consumption Growth," Cambridge Working Papers in Economics 1223, Faculty of Economics, University of Cambridge.
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Browning & Thomas Crossley, 2003. "Shocks, Stocks and Socks," Department of Economics Working Papers 2003-07, McMaster University.
- Susan Dynarski & Jonathan Gruber, 1997. "Can Families Smooth Variable Earnings?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 229-303.
- Susan E. Mayer & Christopher Jencks, 1989. "Poverty and the Distribution of Material Hardship," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 88-114.
- Martin Browning & Thomas F. Crossley, 2009.
"Shocks, Stocks, and Socks: Smoothing Consumption Over a Temporary Income Loss,"
Journal of the European Economic Association,
MIT Press, vol. 7(6), pages 1169-1192, December.
- Martin Browning & Thomas F. Crossley, 2004. "Shocks, stocks and socks: smoothing consumption over a temporary income loss," CAM Working Papers 2004-05, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Hans G. Bloemen & Elena G. F. Stancanelli, 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss," Economica, London School of Economics and Political Science, vol. 72(3), pages 431-452, 08.
- Thomas Crossley & Hamish Low, 2011.
"Borrowing constraints, the cost of precautionary saving and unemployment insurance,"
International Tax and Public Finance,
Springer, vol. 18(6), pages 658-687, December.
- Thomas Crossley & Hamish Low, 2005. "Borrowing constraints, the cost of precautionary saving and unemployment insurance," IFS Working Papers W05/02, Institute for Fiscal Studies.
- Thomas F. Crossley & Hamish W. Low, 2004. "Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance," Quantitative Studies in Economics and Population Research Reports 391, McMaster University.
- Thomas F. Crossley & Hamish W. Low, 2005. "Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance," Social and Economic Dimensions of an Aging Population Research Papers 125, McMaster University.
- Sule Alan & Thomas Crossley & Hamish Low, 2012.
"Saving on a rainy day, borrowing for a rainy day,"
IFS Working Papers
W12/11, Institute for Fiscal Studies.
- Alan, S. & Crossley, T. & Low, H., 2012. "Saving on a Rainy Day, Borrowing for a Rainy Day," Cambridge Working Papers in Economics 1222, Faculty of Economics, University of Cambridge.
- Sule Alan & Thomas Crossley & Hamish Low, 2012. "Saving on a Rainy Day, Borrowing for a Rainy Day," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 1212, Koc University-TUSIAD Economic Research Forum.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sumru Oz).
If references are entirely missing, you can add them using this form.