Research seminar: How do households respond to unemployment? Evidence from high-frequency data

Adam Sheridan, University of Copenhagen: https://www.economics.ku.dk/staff/phd_kopi/?pure=en/persons/500498

Adam is a PhD student at the University of Copenhagen. He has worked with transaction data (payments) from Danske Bank in the thesis.  He is going  to present one of the papers from the thesis.

 

ABSTRACT:                             

We provide precise and comprehensive evidence on how households respond to unemployment shocks by linking multiple high-frequency  administrative data sets from government agencies, covering the entire Danish population, with transaction-level data from  a major bank. The data tracks households for 72 months between January 2009 and December 2014, allowing us to use an event  study design to achieve compelling identification of the impact of nemployment along key response margins. By studying responses  for the same individuals using the same research design, we are able to assess the relative importance of the various margins. We find almost no change in spousal labor supply; a significant increase in the use of interest-only and adjustable-rate Mortgage  products, albeit with little impact on monthly payments; no increase in mortgage debt, but a moderate increase in non-collateralized debt and a sizeable depletion of liquid assets. The largest effect is on household spending. Spending drops, on average, by 6 percent on impact and stays at this lower  level over a two-year period following job loss. The cumulative effect on spending  over this period corresponds to 35 percent of the cumulative income loss.