Job Loss, Credit Constraints and Consumption Growth

Thomas Crossley () and Hamish Low

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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 which generates consumption risk. Our data is focused on job losers. We find that less than 5% of job losers experience a binding credit constraint, but for those that do, they experience significant welfare losses, and consumption growth is 24% higher than for the rest of the population. However, even among those who are currently unconstrained and who are able to borrow if needed, consumption responds to transitory income.

Keywords: Job Loss; Credit Constraints; Consumption (search for similar items in EconPapers)
JEL-codes: D12 D91 J64 (search for similar items in EconPapers)
Date: 2012-05-04
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Related works:
Journal Article: Job Loss, Credit Constraints, and Consumption Growth (2014)
Working Paper: Job Loss, Credit Constraints and Consumption Growth (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1223

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