Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108568
Authors: 
Crossley, Thomas F.
Low, Hamish W.
Year of Publication: 
2011
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1126
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.
Subjects: 
Job Loss
Credit Constraints
Consumption
JEL: 
D12
D91
J64
Document Type: 
Working Paper

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