Intertemporal Consumption and Credit Constraints: Does Total Expenditure Respond to an Exogenous Shock to Credit?

Leth‐Petersen, Søren

doi:10.1257/aer.100.3.1080

Cited by 144 publications

(81 citation statements)

References 45 publications

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“…As a result, the incidence and impact of such constraints is an empirical question of long-standing and continued importance (Hall & Mishkin, 1982;Zeldes, 1989;Jappelli, 1990;Jappelli, Piske, & Souleles, 1998;Gross & Souleles, 2002;Leth-Petersen, 2010). A key challenge in this literature is that researchers rarely have direct observations on whether credit constraints are binding, and thus must typically infer the incidence of credit constraints from observed behavior, such as individuals' holding no liquid assets or the responsiveness of consumption to transitory shocks.…”

Section: Introductionmentioning

confidence: 99%

“…Gross and Souleles (2002) acknowledge that their evidence can partially be explained by a precautionary motive caused by a potential constraint. Leth-Petersen (2010) identifies consumption growth in Denmark as being due to a change in credit conditions, but without taking a stand on whether this is a direct effect or a precautionary effect. Our paper addresses this issue directly.…”

Section: Introductionmentioning

confidence: 99%

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Job Loss, Credit Constraints, and Consumption Growth

Crossley

Low

2014

Review of Economics and Statistics

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Abstract-We use direct evidence on credit constraints to study their importance for household consumption growth and for welfare. We distentangle the direct effect on consumption growth of a currently binding credit constraint from the indirect effect of a potentially binding credit constraint that generates consumption risk. Our data are focused on job losers. We find that less than 5% of job losers experience a binding credit constraint, but those who do experience significant welfare losses, and consumption growth is 24% higher than for the rest of the population. However, even among those who are unconstrained and are able to borrow if needed, consumption responds to transitory income.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Job Loss, Credit Constraints, and Consumption Growth

Crossley

Low

2014

Review of Economics and Statistics

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“…We therefore follow Leth-Petersen (2010) andSheiner (1995) and normalise all monetary variables by a proxy for permanent income in order to obtain a relative measure. We use the fact that we have a very long panel containing income information to construct a proxy for permanent income given by 10 years of disposable income (prior to the house price fall) from 1998 to 2007.…”

Section: Datamentioning

confidence: 99%

“…We follow (among others) Engelhardt (1996) and Leth-Petersen (2010) and exclude households that bought or sold any part of a property within the period of interest. This is because households that plan to move in the near future are likely to change their saving behaviour as moving is associated with moving costs, which we observe as dis-saving thereby leading to a different saving pattern for this selected group of households.…”

mentioning

confidence: 99%

Housing equity, saving and debt dynamics over the Great Recession

Elming

Ermler²

2016

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This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced different house price shocks but similar shocks to income expectations, we exploit the structure of the wage setting process in the Danish public sector. We find strong evidence of a causal link between changes in house prices and saving for young and old home-owners, both through a direct wealth effect and through housing equity serving as collateral or precautionary wealth.

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“…In a more direct approach we adopt the low liquid asset measure, which was suggested by Zeldes (1989) and succesfully applied by Leth-Petersen (2006), to control for borrowing constraints. They argue that the ratio of liquid assets to income is a powerful way to identify the households who potentially face a binding credit constraint.…”

Section: Introductionmentioning

confidence: 99%

Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform

Nielsen

Sørensen

Taber

2010

American Economic Journal: Economic Policy

125

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy ReformHelena Skyt Nielsen Torben Sørensen Christopher Taber The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. In this paper, we investigate the responsiveness of the demand for college to changes in student aid arising from a Danish reform. We separately identify the effect of aid from that of other observed and unobserved variables such as parental income. We exploit the combination of a kinked aid scheme and a reform of the student aid scheme to identify the effect of direct costs on college enrollment. To allow for heterogeneous responses due to borrowing constraints, we use detailed information on parents' assets. We find that enrollment is less responsive than found in other studies and that the presence of borrowing constraints only deters college enrollment to a minor extent.JEL Classification: I22, J24

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Intertemporal Consumption and Credit Constraints: Does Total Expenditure Respond to an Exogenous Shock to Credit?

Cited by 144 publications

References 45 publications

Job Loss, Credit Constraints, and Consumption Growth

Job Loss, Credit Constraints, and Consumption Growth

Housing equity, saving and debt dynamics over the Great Recession

Estimating the Effect of Student Aid on College Enrollment: Evidence from a Government Grant Policy Reform

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