Borrowing constraints, the cost of precautionary saving and unemployment insurance

Thomas Crossley () and Hamish Low

No W05/02, IFS Working Papers from Institute for Fiscal Studies

Abstract: Job losers exhibit significant heterogeneity in wealth holdings and in the marginal propensity to consume transitory income. We consider potential sources of this heterogeneity, whether (some of) the unemployed face borrowing constraints, and the implications of this heterogeneity for unemployment insurance. We show theoretically how the optimal benefit can depend significantly on borrowing constraints, and on other (non- precautionary) savings motives. We report empirical evidence that (i) a quarter of job losers cannot borrow for current consumption, (ii) this constraint is binding for a much smaller fraction, and (iii) that \'excess sensitivity\' is not limited to the constrained.

Pages: 62 pp.
Date: 2005-01-27
New Economics Papers: this item is included in nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.ifs.org.uk/wps/wp0502.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ifs.org.uk/wps/wp0502.pdf [301 Moved Permanently]--> https://www.ifs.org.uk/wps/wp0502.pdf [302 Found]--> https://ifs.org.uk/wps/wp0502.pdf)

Related works:
Journal Article: Borrowing constraints, the cost of precautionary saving and unemployment insurance (2011)
Working Paper: Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance (2005)
Working Paper: Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ifs:ifsewp:05/02

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().