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Import competition and household debt

Author

Listed:
  • Barrot, Jean-Noël

    (MIT Sloan School of Management)

  • Loualiche, Erik

    (MIT Sloan School of Management)

  • Plosser, Matthew

    (Federal Reserve Bank of New York)

  • Sauvagnat, Julien

    (Bocconi University)

Abstract

We analyze the effect of import competition on household balance sheets from 2000 to 2007 using individual data on consumer finances. We exploit variation in exposure to foreign competition using industry-level shipping costs and initial differences in regions’ industry specialization. We show that household debt increased significantly in regions where manufacturing industries are more exposed to import competition. A one standard deviation increase in exposure to import competition explains 30 percent of the cross-regional variation in household leverage growth, and is mostly driven by home equity extraction. Our results highlight the distributive effects of globalization and their consequences for household finances.

Suggested Citation

  • Barrot, Jean-Noël & Loualiche, Erik & Plosser, Matthew & Sauvagnat, Julien, 2017. "Import competition and household debt," Staff Reports 821, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:821
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    References listed on IDEAS

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    Cited by:

    1. Braggion, Fabio & Manconi, Alberto & Zhu, Haikun, 2018. "Can Technology Undermine Macroprudential Regulation? Evidence from Peer-to-Peer Credit in China," CEPR Discussion Papers 12668, C.E.P.R. Discussion Papers.
    2. Teresa C. Fort & Justin R. Pierce & Peter K. Schott, 2018. "New Perspectives on the Decline of US Manufacturing Employment," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 47-72, Spring.
    3. repec:ksa:szemle:1721 is not listed on IDEAS
    4. Zhu, Haikun, 2018. "Essays on political economy of finance and fintech," Other publications TiSEM 93f94423-e671-4041-bb24-8, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    trade; household finance; mortgages;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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