Job Loss, Credit Constraints, and Consumption Growth

Thomas Crossley () and Hamish Low

The Review of Economics and Statistics, 2014, vol. 96, issue 5, 876-884

Abstract: 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.

Keywords: credit constraints; job loss; consumption; income (search for similar items in EconPapers)
JEL-codes: D12 E21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (12)

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Working Paper: Job Loss, Credit Constraints and Consumption Growth (2012)
Working Paper: Job Loss, Credit Constraints and Consumption Growth (2011)
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