Depressed Demand and Supply

29 Pages Posted: 17 Jul 2019 Last revised: 15 Aug 2019

See all articles by Baptiste Massenot

Baptiste Massenot

Goethe University Frankfurt - Research Center SAFE

Giang Nghiem

Goethe University Frankfurt - Research Center SAFE

Date Written: July 22, 2019

Abstract

We investigate the implications of experienced-based learning on consumption-saving and labor supply, two fundamental decisions in business cycle models. Using the Dutch Household Survey, we find that individuals who have experienced higher national unemployment rates over their lifetime save more, borrow less, and work less, after controlling for aggregate shocks, income, wealth, and demographics. Possibly explaining these behavioral responses, these individuals find it more important to save for retirement and to cover unexpected expenses, are more worried about losing their job, and dislike their job more. These results have implications for business cycle models and stabilization policies.

JEL Classification: E7

Suggested Citation

Massenot, Baptiste and Nghiem, Giang, Depressed Demand and Supply (July 22, 2019). SAFE Working Paper No. 257. Available at SSRN: https://ssrn.com/abstract=3421411 or http://dx.doi.org/10.2139/ssrn.3421411

Baptiste Massenot (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Giang Nghiem

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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