How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Datasets
American Economic Journal: Applied Economics
vol. 15,
no. 4, October 2023
(pp. 1-29)
Abstract
How much and through which channels do households self-insure against job loss? Combining data from a large bank and from government sources, we quantify a broad range of responses to job loss in a unified empirical framework. Cumulated over a two-year period, households reduce spending by 30 percent of their income loss. They mainly self-insure through adjustments of liquid balances, which account for 50 percent of the income loss. Other channels—spousal labor supply, private transfers, home equity extraction, mortgage refinancing, and consumer credit—contribute less to self-insurance. Both overall self-insurance and the channels vary with household characteristics in intuitive ways.Citation
Andersen, Asger Lau, Amalie Sofie Jensen, Niels Johannesen, Claus Thustrup Kreiner, Søren Leth-Petersen, and Adam Sheridan. 2023. "How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Datasets." American Economic Journal: Applied Economics, 15 (4): 1-29. DOI: 10.1257/app.20210206Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings
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