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Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss

Author

Listed:
  • Hans Bloemen

    (CentER, Netspar, and Tilburg University - CentER, Netspar, and Tilburg University)

  • Elena Stancanelli

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IZA - Institute for the Study of Labor - Institute for the Study of Labor)

Abstract

One of the reasons for setting up an unemployment insurance scheme is to allow job losers to smooth consumption. We test for the impact of unemployment benefits on changes in household food expenditure of individuals who have recently experienced a job loss. We also study the relationship between unemployment benefits and the financial wealth of the unemployed. From our empirical analysis we conclude that, for households without financial wealth at the time of job loss, unemployment benefits help to smooth food consumption. For households running debt before job loss, there is evidence that lower replacement rates lead to a postponement of debt repayment.

Suggested Citation

  • Hans Bloemen & Elena Stancanelli, 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss," PSE-Ecole d'économie de Paris (Postprint) hal-03416127, HAL.
    • Handle: RePEc:hal:pseptp:hal-03416127
    DOI: 10.1111/j.0013-0427.2005.00424.x
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