Robert Bednarzik, Andreas Kern and John Hisnanick
This paper aims to analyze the question of how household indebtedness impacts households’ incentives to search for and accept work after displacement.
Abstract
Purpose
This paper aims to analyze the question of how household indebtedness impacts households’ incentives to search for and accept work after displacement.
Design/methodology/approach
To analyze the relationship between household indebtedness and unemployment duration, this paper applies standard proportional hazard models. For data, this paper relies on the longitudinal US National Survey of Income and Program Participation (SIPP), covering the period between 2008 and 2012.
Findings
The findings show that a 10% increase in household debt increases the likelihood (hazard) of leaving unemployment by 0.2%–0.4% points. Independent of measuring a household's indebtedness and in light of a series of robustness tests, the results indicate that the pressure of servicing an existing debt burden forces individuals to return to work.
Social implications
From a policy perspective, the research findings support the notion that household indebtedness plays an important mediating role for labor market outcomes through influencing households’ incentives to return to work after displacement. This finding has important implications for the design of effective policy responses to mass layoffs during the current pandemic.
Originality/value
A key innovation of the research is that we can show that household indebtedness impacts the labor supply side. From a macroeconomic perspective, this insight is important in better understanding the role of increased indebtedness (and financialization) in amplifying aggregate macroeconomic dynamics.
Details
Keywords
The North American Free Trade Agreement (NAFTA) will prove consequential in the years ahead. Some of the effects will be tremendous and others subtle. Many of the repercussions…
Abstract
The North American Free Trade Agreement (NAFTA) will prove consequential in the years ahead. Some of the effects will be tremendous and others subtle. Many of the repercussions will be unique for women. Society shapes public policy, and in pursuit of national interests, public policy can take into consideration or neglect the individual. It has been cautioned that short‐term, narrowly focused views leave many individuals unaccounted for; there exists a great danger in making generalizations, particularly when individuals and their lives are at stake. To ensure prosperity for all, all must be considered.