Household Credit and Employment in the Great Recession

Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-025

54 Pages Posted: 10 Nov 2014 Last revised: 23 Mar 2018

Date Written: March 2018

Abstract

How much did shocks to household credit supply reduce employment in the Great Recession? To answer this question, I provide a general foundation for shift-share credit supply shocks, which shows that they are useful for accounting, but direct estimates may be biased. Combining the shift-share shocks with a natural experiment, I find that a one standard deviation decline in credit supply to households reduced home purchase and mortgage refinance credit by 7 and 20 percent, and employment by 3 percent. In partial equilibrium, the household credit channel implies employment losses equal to at least 20 percent of the aggregate decline.

Keywords: Household credit, mortgages, employment, Great Recession, shift-share shock

JEL Classification: E21, E24, E32, G01, G21

Suggested Citation

Mondragon, John, Household Credit and Employment in the Great Recession (March 2018). Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-025, Available at SSRN: https://ssrn.com/abstract=2521177 or http://dx.doi.org/10.2139/ssrn.2521177

John Mondragon (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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