Discussion paper

DP16131 How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets

How do households respond to job loss, and which self-insurance channels are most important? By linking high-frequency customer data from the largest bank in Denmark with government administrative registers, we quantify a broad range of responses to job loss in a unified empirical framework. Two responses stand out: during the first 24 months after job loss, reductions in household spending account for 30% of the income loss, while lower saving in liquid assets accounts for 50%. Other response margins highlighted in the literature - spousal labor supply, private transfers, home equity extraction, mortgage refinancing, and consumer credit - are less important.

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Citation

Andersen, A, A Jensen, N Johannesen, C Kreiner and A Sheridan (2021), ‘DP16131 How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets‘, CEPR Discussion Paper No. 16131. CEPR Press, Paris & London. https://cepr.org/publications/dp16131