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Job Loss, Credit Constraints, and Consumption Growth

Crossley, Thomas F and Low, Hamish W (2014) 'Job Loss, Credit Constraints, and Consumption Growth.' Review of Economics and Statistics, 96 (5). pp. 876-884. ISSN 0034-6535

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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
Uncontrolled Keywords: E21; D12; credit constraints; job loss; consumption; income
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 06 Nov 2013 20:32
Last Modified: 15 Jan 2022 00:23

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