How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets

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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% of their income loss. They mainly self-insure through adjustments of liquid balances, which account for 50% 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 selfinsurance and the channels vary with household characteristics in intuitive ways.
TidsskriftAmerican Economic Journal: Applied Economics
Udgave nummer4
Sider (fra-til)1-29
StatusUdgivet - 2023

ID: 336458423