IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp17940.html
   My bibliography  Save this paper

The Debt Burden of Job Loss in a Nordic Welfare State

Author

Listed:
  • Maczulskij, Terhi

    (ETLA - The Research Institute of the Finnish Economy)

  • Kanninen, Ohto

    (LABORE Labour Institute for Economic Research)

  • Karhunen, Hannu

    (LABORE Labour Institute for Economic Research)

  • Tahvonen, Ossi

    (University of Helsinki)

Abstract

Using linked employer-employee data combined with administrative data on debt enforcement, we analyze the impact of job loss on debt problems in Finland, where even 50% of income may be subject to wage garnishment for up to 25 years. Our results show that job loss, defined by plant closures and mass layoffs, increases the incidence of enforced debt by approximately 10%, with the effect persisting for at least a decade. The impact is particularly large for unpaid taxes and various private debts, such as installment purchase payments. Moreover, the effects are stronger among individuals who were already burdened with excessive overall debt, such as mortgages, before displacement. We also document spillover effects on spouses and children, indicating that job loss can have far-reaching consequences for household indebtedness. However, we find no significant effect on filing for personal bankruptcy.

Suggested Citation

  • Maczulskij, Terhi & Kanninen, Ohto & Karhunen, Hannu & Tahvonen, Ossi, 2025. "The Debt Burden of Job Loss in a Nordic Welfare State," IZA Discussion Papers 17940, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17940
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp17940.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    employer-employee data; involuntary job loss; debt enforcement; default; personal bankruptcy;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp17940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.