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Job loss, credit constraints, and consumption growth

Crossley, TF and Low, HW (2014) 'Job loss, credit constraints, and consumption growth.' Review of Economics and Statistics, 96 (5). 876 - 884. ISSN 0034-6535

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© 2014 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. 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.

Item Type: Article
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 06 Nov 2013 20:32
Last Modified: 17 Aug 2017 17:55

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