How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets
CEBI Working Paper 12/20
50 Pages Posted: 12 May 2020
Date Written: April 17, 2020
How do households respond to job loss, and which self-insurance channels are most important? By linking customer data from the largest bank in Denmark with information from government administrative registers, we quantify a broad range of responses to job loss in a unified empirical framework. Two response margins stand out: during the first 24 months after job loss, households reduce spending by 30% of the income loss while reduced 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.
Keywords: Household economics, unemployment, self-insurance, transaction data
JEL Classification: D14, G51, G52, J65
Suggested Citation: Suggested Citation