Kehoe, P;
Midrigan, V;
Pastorino, E;
(2019)
Debt Constraints and Employment.
Journal of Political Economy
, 127
(4)
pp. 1926-1991.
10.1086/701608.
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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.
| Type: | Article |
|---|---|
| Title: | Debt Constraints and Employment |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1086/701608 |
| Publisher version: | https://doi.org/10.1086/701608 |
| Language: | English |
| Additional information: | This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10054391 |
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