Positive Externalities of Social Insurance: Unemployment Insurance and Consumer CreditJoanne W. Hsu, David A. Matsa, Brian T. Melzer
NBER Working Paper No. 20353 This paper studies the impact of unemployment insurance (UI) on consumer credit markets. Exploiting heterogeneity in UI generosity across U.S. states and over time, we find that UI helps the unemployed avoid defaulting on their mortgage debt. We estimate that UI expansions during the Great Recession prevented about 1.4 million foreclosures. Lenders respond to this decline in default risk by expanding credit access and reducing interest rates for low-income households at risk of being laid off. Our findings call attention to two benefits of unemployment insurance not previously highlighted: reducing deadweight losses from loan default and expanding access to credit. A non-technical summary of this paper is available in the December 2014 NBER Digest.
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Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w20353 Users who downloaded this paper also downloaded* these:
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