Import Competition and Household Debt

66 Pages Posted: 15 Jul 2016 Last revised: 6 Jun 2017

Jean-Noel Barrot

Massachusetts Institute of Technology (MIT)

Erik Loualiche

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: May 1, 2017

Abstract

We analyze the effect of import competition on household balance sheets from 2000 to 2007 using individual-level data on leverage and defaults. We exploit cross-regional variation in exposure to foreign import competition using industry level shipping costs and initial differences in regions' industry specialization. We confirm the adverse effect of import competition on local labor markets during this period (Autor et al. 2013). We then show that household debt increased significantly in regions where manufacturing industries are more exposed to import competition. A one standard deviation in exposure to import competition explains 30% of the cross-regional variation in the growth in household leverage over the period. Our results highlight the distributive effects of globalization and their implications for household debt.

Keywords: globalization, import competition, household debt, defaults, consumer credit, credit supply, credit expansion

Suggested Citation

Barrot, Jean-Noel and Loualiche, Erik and Plosser, Matthew C. and Sauvagnat, Julien, Import Competition and Household Debt (May 1, 2017). Available at SSRN: https://ssrn.com/abstract=2808981 or http://dx.doi.org/10.2139/ssrn.2808981

Jean-Noel Barrot (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Erik Loualiche

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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