The Impact of Consumer Credit Access on Unemployment
Unemployed households' access to unsecured revolving credit more than tripled over the last three decades. This paper analyzes how both cyclical fluctuations and trend increases in credit access impact the business cycle. The main quantitative result is that credit expansions and contractions have contributed to moderately deeper and more protracted recessions over the last 40 years. As more individuals obtained credit from 1977 to 2010, cyclical credit fluctuations affected a larger share of the population and became more important determinants of employment dynamics. Even though business cycles are more volatile, newborns strictly prefer to live in the economy with growing, but fluctuating, access to credit markets.
I would like to thank Gary Hansen, Lee Ohanian, and Pierre-Olivier Weill for their guidance and support. I would like to thank Andy Atkeson, Manuel Amador, Yves Balasko, Hugo Hopenhayn, Erik Hurst, Tim Kehoe, John Kennes, Ricardo Lagos, Ellen McGrattan, Seth Neumuller, Guido Menzio, Casey Mulligan, Ana Luisa Pessoa Araujo, Fabrizio Perri, Ed Prescott, Andrea Raffo, Guillaume Rocheteau, Jim Schmitz, Robert Shimer, and Nancy Stokey for useful comments. This paper was funded This paper was partly written at the Federal Reserve Bank of Minneapolis and the Federal Reserve Bank of St. Louis. I am especially grateful for their hospitality. This research was supported by the National Science Foundation (Award No. SES-1824422) and the UCLA Ziman Center for Real Estate. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Kyle F Herkenhoff, 2019. "The Impact of Consumer Credit Access on Unemployment," The Review of Economic Studies, vol 86(6), pages 2605-2642. citation courtesy of