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Depressed demand and supply

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  • Massenot, Baptiste
  • Nghiem, Giang

Abstract

We investigate the implications of experienced-based learning on consumption-saving and labor supply, two fundamental decisions in business cycle models. Using the Dutch Household Survey, we find that individuals who have experienced higher national unemployment rates over their lifetime save more, borrow less, and work less, after controlling for aggregate shocks, income, wealth, and demographics. Possibly explaining these behavioral responses, these individuals find it more important to save for retirement and to cover unexpected expenses, are more worried about losing their job, and dislike their job more. These results have implications for business cycle models and stabilization policies.

Suggested Citation

  • Massenot, Baptiste & Nghiem, Giang, 2019. "Depressed demand and supply," SAFE Working Paper Series 257, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:257
    DOI: 10.2139/ssrn.3421411
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    References listed on IDEAS

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    Cited by:

    1. Hansen, Kerstin F. & Stutzer, Alois, 2021. "Experiencing Booms and Busts in the Welfare State and Support for Redistribution," IZA Discussion Papers 14327, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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