Debt and the Response to Household Income Shocks: Validation and Application of Linked Financial Account Data

Scott Baker

Journal of Political Economy, 2018, vol. 126, issue 4, 1504 - 1557

Abstract: The increasing availability of data derived from linked consumer financial accounts has the potential to dramatically expand the potential for research. Examining the most comprehensive existing set of linked-account data, consisting of transaction and balance sheet data for millions of Americans, I demonstrate the power and versatility of such sources. I discuss advantages and concerns arising from this type of data and match a range of distributional moments to external sources. As one application, I test consumption elasticities across households with varying levels, and types, of debt. I find that heterogeneity in consumption elasticity can be explained entirely by credit and liquidity.

Date: 2018
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