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The Credit Market Consequences of Job Displacement

Author

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  • Benjamin J. Keys

    (Wharton School, University of Pennsylvania, and NBER)

Abstract

This paper studies the role of job displacement in the household bankruptcy decision. Using an event-study methodology, I find that NLSY respondents are over three times more likely to file for bankruptcy immediately following a job loss. Using county-level data, I find similar magnitudes in the aggregate, with significant effects lasting two to three years. The results suggest that unemployment spells can have significant long-term consequences on households’ credit market outcomes.

Suggested Citation

  • Benjamin J. Keys, 2018. "The Credit Market Consequences of Job Displacement," The Review of Economics and Statistics, MIT Press, vol. 100(3), pages 405-415, July.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:3:p:405-415
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    Cited by:

    1. Kleiner, Kristoph & Stoffman, Noah & Yonker, Scott E., 2021. "Friends with bankruptcy protection benefits," Journal of Financial Economics, Elsevier, vol. 139(2), pages 578-605.
    2. Kostøl, Andreas Ravndal & Merkle, Matthew C. & Grindaker, Morten, 2024. "Layoff Costs and Learning about Employer Financial Distress," IZA Discussion Papers 17340, Institute of Labor Economics (IZA).
    3. Legal, Diego & Young, Eric R., 2024. "The effect of minimum wages on consumer bankruptcy," Journal of Economics and Business, Elsevier, vol. 129(C).
    4. Benjamin L. Collier & Daniel A. Hartley & Benjamin J. Keys & Jing Xian Ng, 2024. "Credit When You Need It," NBER Working Papers 32845, National Bureau of Economic Research, Inc.
    5. Gan, Li & Hernandez, Manuel A. & Zhang, Shuoxun, 2021. "Insurance or deliberate use of the bankruptcy law for financial gain? Testing for heterogeneous filing behaviors in the United States," Economic Modelling, Elsevier, vol. 105(C).
    6. Tal Gross & Raymond Kluender & Feng Liu & Matthew J. Notowidigdo & Jialan Wang, 2021. "The Economic Consequences of Bankruptcy Reform," American Economic Review, American Economic Association, vol. 111(7), pages 2309-2341, July.
    7. Sean Hundtofte & Arna Olafsson & Michaela Pagel, 2019. "Credit Smoothing," NBER Working Papers 26354, National Bureau of Economic Research, Inc.
    8. Elena Lagomarsino & Alessandro Spiganti, 2023. "Risk Aversion and the Size of Desired Debt," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 369-396, March.
    9. Jonathan Bauchet & David Evans, 2019. "Personal Bankruptcy Determinants Among U.S. Households During the Peak of the Great Recession," Journal of Family and Economic Issues, Springer, vol. 40(4), pages 577-591, December.
    10. Jonathan Fisher & Nathaniel Johnson, 2019. "The Two-Income Trap: Are Two-Earner Households More Financially Vulnerable?," Working Papers 19-19, Center for Economic Studies, U.S. Census Bureau.
    11. Cantarella, Michele & Kavonius, Ilja Kristian, 2025. "The heterogeneous impact of labor market shifts on household mortgage-taking," Working Paper Series 3109, European Central Bank.
    12. Ryan M. Goodstein & Mark J. Kutzbach, 2024. "The Effect of Job Loss on Bank Account Ownership," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(8), pages 1963-2000, December.
    13. Maczulskij, Terhi & Kanninen, Ohto & Karhunen, Hannu & Tahvonen, Ossi, 2024. "Debt Burden of Job Loss in a Nordic Welfare State," ETLA Working Papers 115, The Research Institute of the Finnish Economy.
    14. Michele Cantarella & Ilja Kristian Kavonius, 2024. "Job polarisation and household borrowing," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(4), pages 959-980, December.
    15. J. Carter Braxton & Gordon Phillips & Kyle Herkenhoff, 2018. "Can the Unemployed Borrow? Implications for Public Insurance," 2018 Meeting Papers 564, Society for Economic Dynamics.
    16. Teeple, Keisuke, 2023. "Surprise and default in general equilibrium," Theoretical Economics, Econometric Society, vol. 18(4), November.
    17. Lei, Lei & Lu, Weijie & Niu, Geng & Zhou, Yang, 2024. "Religiosity and financial distress of the young," Journal of Banking & Finance, Elsevier, vol. 168(C).
    18. Michelle M. Miller, 2022. "The impact of paid sick leave laws on consumer and business bankruptcies," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(4), pages 844-896, December.
    19. Larsen, Vance & Carriaga, Riona & Wething, Hilary & Zhao, Jiaying & Hall, Crystal, 2023. "Behavioral consequences of income and expense shocks," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 106(C).
    20. Pattison, Nathaniel, 2020. "Consumption smoothing and debtor protections," Journal of Public Economics, Elsevier, vol. 192(C).
    21. de Bruijn, Ernst-Jan & Vethaak, Heike & Koning, Pierre & Knoef, Marike, 2023. "Debt Relief for the Financially Vulnerable: Impact on Employment, Welfare Receipt, and Mental Health," IZA Discussion Papers 16336, Institute of Labor Economics (IZA).

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