Year: 2020
Type: report
Abstract: We show that unemployed individuals maintain significant access to credit.Following job loss, the unconstrained borrow, while the constrained default and delever.Both defaulters and borrowers are using credit to smooth consumption.We quantitatively show that long-term credit relationships and credit-registries allow the unemployed to partially offset income losses using credit.We estimate the model and find that the optimal provision of public insurance is unambiguously lower with greater credit access.Using a utilitarian welfare criterion, the optimal steady-state policy is to lower the replacement rate of public insurance from the current US policy of 41.2% to 38.3%.Moreover, lowering the replacement rate to 38.3% yields welfare gains to the majority of workers along the transition path.
DOI: 10.3386/w27026
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
Awards: EITM: Developing the Tools to Understand Human Performance: An Empirical Infrastructure to Foster Research Collaboration, ITR-(ECS+ASE)-(dmc+int): Info Tech Challenges for Secure Access to Confidential Social Science Data, The Impact of Consumer Credit Access on Earnings Mobility, Entrepreneurship and Income Inequality, Dynamic Employer-Household Data and the Social Data Infrastructure
OpenAlex ID: W2909367375