HOME HELP FEEDBACK SUBSCRIPTIONS ARCHIVE SEARCH TABLE OF CONTENTS		QUICK SEARCH:   [advanced] Author: Keyword(s): Year:  Vol:  Page:

This Article Abstract Full Text (PDF) Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Sullivan, J. X. Search for Related Content

Borrowing During Unemployment

Unsecured Debt as a Safety Net

	Abstract

TOP Abstract References

 
This paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment-induced earnings losses. Results indicate that very low-asset households—those in the bottom decile of total assets—do not borrow in response to these shortfalls. However, other low-asset households do borrow, increasing unsecured debt by more than 11 cents per dollar of earnings lost. In contrast, wealthy households do not increase unsecured debt during unemployment. The evidence suggests that very low-asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells.

	References

TOP Abstract References

 

Alessie, Rob, and Annamaria Lusardi. 1997. "Saving and Income Smoothing: Evidence from Panel Data". European Economic Review 41(7):1251–79.

Athreya, Kartik.2002. "Welfare Implications of the Bankruptcy Reform Act of 1999". Journal of Monetary Economics 49(8):1567–95.

Attanasio, Orazio P. 1999. "Consumption." In Handbook of Macroeconomics, eds. John B. Taylor and Michael Woodford, edition 1, volume 1, 741–812. Elsevier.

Bentolila, Samuel, and Andrea Ichino. 2008. "Unemployment and Consumption Near and Far Away from the Mediterranean." Journal of Population Economics.

Berkowitz, Jeremy, and Michelle White. 2004. "Bankruptcy and Small Firms’ Access to Credit". RAND Journal of Economics 35(1):69–84.

Bloemen, Hans, and Elena Stancanelli. 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss". Economica 72(287):431–52.

Bird, Edward J., Paul A. Hagstrom, and Robert Wild. 1999. "Credit Card Debts of the Poor: High and Rising". Journal of Policy Analysis and Management 18(1):125–33.

Blundell, Richard, and Luigi Pistaferri. 2003. "Income Volatility and Household Consumption: The Impact of Food Assistance Programs". Journal of Human Resources 38(S):1032–50.

Brito, Dagobert L., and Peter R. Hartley 1995. "Consumer Rationality and Credit Cards". Journal of Political Economy 103(2):400–33.

Browning, Martin, and Thomas F. Crossley 2001. "Unemployment Insurance Benefit Levels and Consumption Changes". Journal of Public Economics 80(1):1–23.

Browning, Martin, and Thomas F. Crossley. 2004. "Shocks, Stocks and Socks: Smoothing Consumption Over a Temporary Income Loss." Centre for Applied Microeconometrics, University of Copenhagen working paper 2004–05.

Browning, Martin, and Annamaria Lusardi. 1996. "Household Saving: Micro Theories and Micro Facts". Journal of Economic Literature 34(4):1797–1855.

Carroll, Christopher. 1997. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis". Quarterly Journal of Economics 92(1):1–56.

Carroll, Christopher D., Karen E. Dynan, and Spencer D. Krane 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households’ Balance Sheets". Review of Economics and Statistics 85(3):586–604.

Carroll, Christopher D., and Andrew A. Samwick 1998. "How Important is Precautionary Saving?" Review of Economics and Statistics 80(3):410–19.

Chatterjee, Satyajit, Dean Corbae, Makoto Nakajima, and Jose-Victor Rios-Rull. 2005. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default." Federal Reserve Bank of Philadelphia working paper 05–18.

Cullen, Julie Berry, and Jonathan Gruber. 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?" Journal of Labor Economics 18(3):546–72.

Cox, D., and T. Jappelli 1993. "The Effects of Borrowing Constraints on Consumer Liabilities". Journal of Money, Credit, and Banking 25(2):197–213.

Davis, Steven, Felix Kubler, and Paul Willen. 2006. "Borrowing Costs and the Demand for Equity over the Life Cycle". Review of Economics and Statistics 88(2):348–62.

Dynarski, Susan, and Jonathan Gruber. 1997. "Can Families Smooth Variable Earnings?" Brookings Papers on Economic Activity 1997(1):229–303.

Edelberg, Wendy. 2006. "Risk-based Pricing of Interest Rates for Consumer Loans". Journal of Monetary Economics 53(8):2283–98.

Engelhardt, Gary V. 1996. "Consumption, Down Payments, and Liquidity Constraints". Journal of Money, Credit, and Banking 28(2):255–71.

Engen, Eric M., and Jonathan Gruber. 2001. "Unemployment Insurance and Precautionary Saving". Journal of Monetary Economics 47(3):545–79.

Evans, David S., and Richard Schmalensee. 1999. Paying with Plastic: The Digital Revolution in Buying and Borrowing. Cambridge: MIT Press.

Federal Reserve System. 2005. "Consumer Credit." Federal Reserve Statistical Release G19. Washington, D.C.: Board of Governors of the Federal Reserve System.

Feldstein, Martin, and Daniel Altman. 1998. "Unemployment Insurance Savings Accounts." NBER Working paper 6860. Cambridge, Mass.: National Bureau of Economic Research.

Flavin, Marjorie. 1991. "The Joint Consumption/Asset Demand Decision: A Case Study in Robust Estimation." NBER Working paper 3802. Cambridge, Mass.: National Bureau of Economic Research.

Flemming, J. S. 1978. "Aspects of Optimal Unemployment Insurance: Search, Leisure, Savings and Capital Market Imperfections". Journal of Public Economics 70(3):403–25.

Garcia, René, Annamaria Lusardi, and Serena Ng. 1997. "Excess Sensitivity and Asymmetries in Consumption: An Empirical Investigation". Journal of Money, Credit, and Banking 29(2):154–76.

Gross, David B., and Nicholas S. Souleles 2002. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data". Quarterly Journal of Economics 117(1):149–85.

Gruber, Jonathan.2001. "The Wealth of the Unemployed". Industrial and Labor Relations Review 55(1):79–94.

Gruber, Jonathan.2000. "Cash Welfare as a Consumption Smoothing Mechanism for Divorced Mothers". Journal of Public Economics 75(2):157–82.

Gruber, Jonathan.1997. "The Consumption Smoothing Benefits of Unemployment Insurance". American Economic Review 87(1):192–205.

Hurst, Erik, and Frank Stafford. 2004. "Home is Where the Equity Is: Liquidity Constraints, Refinancing and Consumption". Journal of Money, Credit and Banking 36(6):985–1014.

Jappelli, Tullio. 1990. "Who is Credit Constrained in the US Economy?" Quarterly Journal of Economics 105(1):219–34.

Jappelli, Tullio, Jorn Steffen Pischke, and Nicholas S. Souleles 1998 "Testing for Liquidity Constraints in Euler Equations with Complementary Data Sources". Review of Economics and Statistics 80(2):251–62.

Laibson, David, Andrea Repetto, and Jeremy Tobacman. 2003. "A Debt Puzzle." In Knowledge, Information, and Expectations in Modern Economics: In Honor of Edmund S. Phelps, ed. Philippe Aghion, Roman Frydman, Joseph Stiglitz, and Michael Woodford, 228–266. Princeton: Princeton University Press.

Lupton, Joseph, and Frank Stafford. 2000. "Five Years Older: Much Richer or Deeper in Debt?" University of Michigan working paper.

Lyons, Angela. 2003. "How Credit Access Has Changed Over Time for U.S. Households". Journal of Consumer Affairs 37(2):231–55.

Manning, Robert D. 2000. Credit Card Nation: The Consequences of America’s Addiction to Credit. New York: Basic Books.

Meyer, Bruce D., and James X. Sullivan 2003. "Measuring the Well-Being of the Poor Using Income and Consumption". Journal of Human Resources 38(S):1180–1220.

Posner, Eric A., Hynes, Richard M., and Malani, Anup. 2001. "The Political Economy of Property Exemption Laws." University of Chicago Law and Economics, Olin Working Paper 136.

Souleles, Nicholas S. 1999. "The Response of Household Consumption to Income Tax Refunds". American Economic Review 89(4):947–58.

Stephens, Melvin Jr 2001. "The Long-Run Consumption Effects of Earnings Shocks". Review of Economics and Statistics 83(1):28–36.

Stevens, Ann Huff. 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses". Journal of Labor Economics 15(1):165–88.

Sullivan, James X. 2006. "Borrowing During Unemployment: Unsecured Debt as a Safety Net." University of Notre Dame working paper.

Telyukova, Irina. 2006. "Household Need for Liquidity and the Credit Card Debt Puzzle." Department of Economics, University of California, San Diego working paper.

White, Michelle. 2006. "Bankruptcy and Consumer Behavior: Theory and U.S. Evidence." In The Economics of Consumer Credit, eds. Giuseppe Bertola, Richard Disney, and Charles Grant, 239–74. Cambridge: MIT Press.

Zeldes, Stephen P. 1989. "Consumption and Liquidity Constraints: an Empirical Investigation". Journal of Political Economy 97(2):305–46.

This Article Abstract Full Text (PDF) Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Sullivan, J. X. Search for Related Content