Full Citation

Title: Debt constraints and employment

Citation Type: Journal Article

Publication Year: 2019

ISBN:

ISSN: 1537534X

DOI: 10.1086/701608

NSFID:

PMCID:

PMID:

Abstract: During the Great Recession, US regions that experienced large declines in household debt also experienced large drops in consumption, employment, and wages. We develop a search and matching model in which tighter debt constraints raise the cost of investing in new job vacancies and so reduce job-finding rates and employment. On-the-job human capital accumulation is critical to generating sizable drops in employment: it increases the duration of the benefit flows from posting vacancies, thereby amplifying the employment drop from a credit tightening 10-fold relative to the standard model. Our model reproduces the salient cross-regional features of the US Great Recession.

Url: https://www.journals.uchicago.edu/doi/10.1086/701608

User Submitted?: No

Authors: Kehoe, Patrick J.; Midrigan, Virgiliu; Pastorino, Elena

Periodical (Full): Journal of Political Economy

Issue: 4

Volume: 127

Pages: 1926-1991

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

Countries: