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Research ArticleArticles

Borrowing During Unemployment

Unsecured Debt as a Safety Net

James X. Sullivan
Journal of Human Resources, March 2008, 43 (2) 383-412; DOI: https://doi.org/10.3368/jhr.43.2.383
James X. Sullivan
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Abstract

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.

  • Received January 2006.
  • Accepted June 2007.

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Journal of Human Resources
Vol. 43, Issue 2
31 Mar 2008
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Borrowing During Unemployment
James X. Sullivan
Journal of Human Resources Mar 2008, 43 (2) 383-412; DOI: 10.3368/jhr.43.2.383

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Borrowing During Unemployment
James X. Sullivan
Journal of Human Resources Mar 2008, 43 (2) 383-412; DOI: 10.3368/jhr.43.2.383
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