How Credit Constraints Impact Job Finding Rates, Sorting & Aggregate Output / Kyle Herkenhoff, Gordon Phillips, Ethan Cohen-Cole.

Format:

Book

Author/Creator:

Herkenhoff, Kyle.

Contributor:

National Bureau of Economic Research.

Phillips, Gordon.

Cohen-Cole, Ethan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22274.

NBER working paper series no. w22274

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

We empirically and theoretically examine how consumer credit access affects displaced workers. Empirically, we link administrative employment histories to credit reports. We show that an increase in credit limits worth 10% of prior annual earnings allows individuals to take .15 to 3 weeks longer to find a job. Conditional on finding a job, they earn more and work at more productive firms. We develop a labor sorting model with credit to provide structural estimates of the impact of credit on employment outcomes, which we find are similar to our empirical estimates. We use the model to understand the impact of consumer credit on the macroeconomy. We find that if credit limits tighten during a downturn, employment recovers quicker, but output and productivity remain depressed. This is because when limits tighten, low-asset, low-productivity job losers cannot self-insure. Therefore, they search less thoroughly and take more accessible jobs at less productive firms.

Notes:

Print version record

May 2016.