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

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  • Asger Lau Andersen
  • Amalie Sofie Jensen
  • Niels Johannesen
  • Claus Thustrup Kreiner
  • Søren Leth-Petersen
  • Adam Sheridan

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 percent of their income loss. They mainly self-insure through adjustments of liquid balances, which account for 50 percent 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 self-insurance and the channels vary with household characteristics in intuitive ways.

Suggested Citation

  • Asger Lau Andersen & Amalie Sofie Jensen & Niels Johannesen & Claus Thustrup Kreiner & Søren Leth-Petersen & Adam Sheridan, 2023. "How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Datasets," American Economic Journal: Applied Economics, American Economic Association, vol. 15(4), pages 1-29, October.
    • Handle: RePEc:aea:aejapp:v:15:y:2023:i:4:p:1-29
    DOI: 10.1257/app.20210206
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    References listed on IDEAS

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    1. John Sabelhaus & David Johnson & Stephen Ash & David Swanson & Thesia I. Garner & John Greenlees & Steve Henderson, 2014. "Is the Consumer Expenditure Survey Representative by Income?," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 241-262, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Odran Bonnet & Étienne Fize & Tristan Loisel & Lionel Wilner, 2024. "Is Carbon Tax Truly More Salient? Evidence from Fuel Tourism at the France-Germany Border," CESifo Working Paper Series 10918, CESifo.
    2. Kim, Seonghoon & Wang, Lanjie, 2024. "Navigating Unemployment without Unemployment Insurance: Evidence from Singapore," IZA Discussion Papers 17299, Institute of Labor Economics (IZA).
    3. Odran Bonnet & Étienne Fize & Tristan Loisel & Lionel Wilner, 2024. "Is Carbon Tax Truly More Salient? Evidence from Fuel Tourism at the France-Germany Border," CESifo Working Paper Series 10918, CESifo.
    4. Nathaniel Pattison, 2024. "Landlords as Lenders of Last Resort? Late Housing Payments During Unemployment," Departmental Working Papers 2401, Southern Methodist University, Department of Economics.
    5. Kostøl, Andreas Ravndal & Merkle, Matthew C. & Grindaker, Morten, 2024. "Layoff Costs and Learning about Employer Financial Distress," IZA Discussion Papers 17340, Institute of Labor Economics (IZA).
    6. M. Adam & O. Bonnet & E. Fize & T. Loisel & M. Rault & L. Wilner, 2023. "How does fuel demand respond to price changes? Quasi-experimental evidence based on high-frequency data," Documents de Travail de l'Insee - INSEE Working Papers 2023-17, Institut National de la Statistique et des Etudes Economiques.
    7. Figueiredo, Ana & Marie, Olivier & Markiewicz, Agnieszka, 2024. "Job Security and Liquid Wealth," IZA Discussion Papers 16744, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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