 Credit access, labor supply, and consumer welfareEconomic Quarterly, 2008, vol. 94, issue Win, 17-44 Abstract: Recent evidence suggests that households' access to credit has improved. If households can vary labor supply in response to stochastic productivity shocks, changes in credit markets can be expected to alter not only savings and borrowing behavior, but also labor effort. The purpose of this article is to take a step toward understanding how changes in the ability of households to borrow alter the behavior of consumption, saving, and leisure. The main results are as follows. First, the hardest working households are those who are least wealthy, and most strikingly, also the least productive. Second, credit access can play an important role in reducing high labor effort by low-productivity households. Third, the buffer-stock tendencies of households imply that the distance from the borrowing constraint is often more important that the actual level of wealth in influencing labor effort. Fourth, measures of the welfare gains to current consumers show that there are significant benefits from expansions in credit access, and that these gains accrue disproportionately to the relatively poor and relatively rich. Keywords: Labor supply; Credit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fip:fedreq:y:2008:i:win:p:17-44:n:v.94no.1 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Economic Quarterly from Federal Reserve Bank of Richmond Contact information at EDIRC. |
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