Job Loss, Credit Constraints and Consumption Growth

Thomas Crossley () and Hamish Low

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

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 constraints 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)
Pages: 28 pages
Date: 2011-10
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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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 (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:koc:wpaper:1126

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