DP16131 How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets
|Author(s):||Asger Lau Andersen, Amalie Sofie Jensen, Niels Johannesen, Claus T. Kreiner, Søren Leth-Petersen, Adam Sheridan|
|Publication Date:||May 2021|
|Keyword(s):||Cost of unemployment, Social Insurance|
|Programme Areas:||Labour Economics, Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16131|
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.