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Household Debt Composition and Labor Market Outcomes

Author

Listed:
  • Nelson Camanho
  • Toni dos Santos
  • Jesús Gorrín
  • Bernardo Ricca

Abstract

How does the composition of personal debt affect job search outcomes? This paper investigates the impact of household debt levels and composition at the time of mass layoffs on job search duration and post-reemploymentwage growth. Using a comprehensive dataset that links personal debt to the employment histories of all formal workers in Brazil, we find that both the level and type of debt significantly shape job search behavior. In line with the theory of debt overhang, workers with high levels of non-collateralized, wage-linked debt are less likely to find new employment but secure higher wages upon reemployment. In contrast, the negative effects areweaker forworkers with collateralized mortgage debt. Overall, our findings underscore the critical role of personal debt structure in shaping labor market dynamics.

Suggested Citation

  • Nelson Camanho & Toni dos Santos & Jesús Gorrín & Bernardo Ricca, 2025. "Household Debt Composition and Labor Market Outcomes," Working Papers Series 616, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:616
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    References listed on IDEAS

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    1. Atif Mian & Amir Sufi & Emil Verner, 2017. "Household Debt and Business Cycles Worldwide," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1755-1817.
    2. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
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