The Effect of Household Debt Deleveraging on Unemployment Evidence from Spanish Provinces

Sebastian Watzka

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: The Spanish economy is currently plagued by a deep recession with very high unemployment. We ask how much of the unemployment increase in Spain can be traced back to the debt deleveraging needs of Spanish households. We use provincial household debt and sectoral unemployment data and follow Mian and Sufi (2012) to isolate the effect of household debt on Spanish unemployment. We find that the level of household sector debt in Spanish provinces in 2007 is a highly significant determinant of the subsequent increase in provincial unemployment from 2007 to 2010. Our estimates indicate that approximately 1/3 of the increase in overall Spanish unemployment over that period can be traced back to high household debt levels.

JEL-codes: E21 J20 O52 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79853

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