How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets

62 Pages Posted: 14 May 2021

See all articles by Asger Lau Andersen

Asger Lau Andersen

University of Copenhagen - Department of Economics

Amalie Sofie Jensen

University of Copenhagen, Department of Economics, Students

Niels Johannesen

University of Copenhagen

Claus Thustrup Kreiner

University of Copenhagen - Department of Economics

Søren Leth‐Petersen

University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Adam Sheridan

University of Copenhagen

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

How do households respond to job loss, and which self-insurance channels are most important? By linking high-frequency customer data from the largest bank in Denmark with government administrative registers, we quantify a broad range of responses to job loss in a unified empirical framework. Two responses stand out: during the first 24 months after job loss, reductions in household spending account for 30% of the income loss, while lower 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.

Suggested Citation

Andersen, Asger Lau and Jensen, Amalie Sofie and Johannesen, Niels and Kreiner, Claus Thustrup and Leth-Petersen, Soren and Sheridan, Adam, How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Data Sets (May 2021). CEPR Discussion Paper No. DP16131, Available at SSRN: https://ssrn.com/abstract=3846244

Asger Lau Andersen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Amalie Sofie Jensen

University of Copenhagen, Department of Economics, Students ( email )

København
Denmark

Niels Johannesen

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Claus Thustrup Kreiner

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Soren Leth-Petersen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Adam Sheridan

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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