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.
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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 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
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