Publication: Job loss, credit constraints, and consumption growth
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Low, Hamish W.
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NO
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Abstract
We 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 constraint from the indirect effect of a potentially binding credit constraint that generates consumption risk. Our data are focused on job losers. We find that less than 5% of job losers experience a binding credit constraint, but those who do experience significant welfare losses, and consumption growth is 24% higher than for the rest of the population. However, even among those who are unconstrained and are able to borrow if needed, consumption responds to transitory income.
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Publisher
Massachusetts Institute of Technology (MIT) Press
Subject
Economics, Social sciences, Mathematical methods
Citation
Has Part
Source
Review of Economics and Statistics
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Edition
DOI
10.1162/REST_a_00417