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

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Abstract

How much and through which channels do households self-insure against job loss? Combining data from a large bank and from government sources, we quantify a broad range of responses to job loss in a unified empirical framework. Cumulated over a two-year period, households reduce spending by 30% of their income loss. They mainly self-insure through adjustments of liquid balances, which account for 50% of the income loss. Other channels—spousal labor supply, private transfers, home equity extraction, mortgage refinancing, and consumer credit—contribute less to self-insurance. Both overall selfinsurance and the channels vary with household characteristics in intuitive ways.
Original languageEnglish
JournalAmerican Economic Journal: Applied Economics
Volume15
Issue number4
Pages (from-to)1-29
ISSN1945-7782
DOIs
Publication statusPublished - 2023

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