Economics at your fingertips  

Debt Constraints and Employment

Patrick Kehoe (), Virgiliu Midrigan and Elena Pastorino ()

Journal of Political Economy, 2019, vol. 127, issue 4, 1926 - 1991

Abstract: During the Great Recession, US regions that experienced large declines in household debt also experienced large drops in consumption, employment, and wages. We develop a search and matching model in which tighter debt constraints raise the cost of investing in new job vacancies and so reduce job-finding rates and employment. On-the-job human capital accumulation is critical to generating sizable drops in employment: it increases the duration of the benefit flows from posting vacancies, thereby amplifying the employment drop from a credit tightening 10-fold relative to the standard model. Our model reproduces the salient cross-regional features of the US Great Recession.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (22) Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Debt Constraints and Employment (2016) Downloads
Working Paper: Debt Constraints and Employment (2016) Downloads
Working Paper: Debt Constraints and Unemployment (2014) Downloads
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:

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

Page updated 2023-06-15
Handle: RePEc:ucp:jpolec:doi:10.1086/701608