Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71536
Authors: 
Crossley, Thomas F.
Low, Hamish
Year of Publication: 
2005
Series/Report no.: 
IFS Working Papers, Institute for Fiscal Studies (IFS) 05/02
Abstract: 
Job losers exhibit significant heterogeneity in wealth holdings and in the marginal propensity to consume transitory income. We consider potential sources of this heterogeneity, whether (some of) the unemployed face borrowing constraints, and the implications of this heterogeneity for unemployment insurance. We show theoretically how the optimal benefit can depend significantly on borrowing constraints, and on other (nonprecautionary) savings motives. We report empirical evidence that (i) a quarter of job losers cannot borrow for current consumption, (ii) this constraint is binding for a much smaller fraction, and (iii) that \'excess sensitivity\' is not limited to the constrained.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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