Import Competition and Household Debt
66 Pages Posted: 15 Jul 2016 Last revised: 6 Jun 2017
Date Written: May 1, 2017
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
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