TY  - JOUR
AU  - Campbell,Jeffrey R.
AU  - Hercowitz,Zvi
TI  - The Dynamics of Work and Debt
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10201
PY  - 2004
Y2  - January 2004
UR  - http://www.nber.org/papers/w10201
L1  - http://www.nber.org/papers/w10201.pdf
N1  - Author contact info:
Jeffrey R. Campbell
Senior Economist
Economic Research Department
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604-1413
Tel: 312/322-6156
Fax: 312/322-2357
E-Mail: jcampbell@frbchi.org

Zvi Hercowitz
E. Berglas School of Economics
Tel Aviv University
Ramat-Aviv, Tel Aviv   69978
ISRAEL
Tel: NA
E-Mail: zvih@post.tau.ac.il
AB  - This paper characterizes the labor supply and borrowing of a household facing collateral requirements that limit its debt and compel it to accumulate equity in its durable goods stock. The household's discount rate exceeds the market rate of interest, so it would otherwise finance increased current consumption by borrowing against future wages. Collateral constraints generate a positive comovement between the household's debt, the stock of durable goods and labor supply following wage or interest rate shocks---as the household's labor supply adjusts to finance downpayments on new durable good purchases and the subsequent debt repayment. Increasing the speed of debt repayment amplifies these movements.
ER  -