Job polarisation and household borrowing

Abstract

The last few decades have seen transformative changes to the structure of employment, which have led to a deterioration in demand for middle-skill occupations, a process known as job polarisation. As demand for middle-skill workers shrinks, expectations about households’ income through their lifetime horizon must be adjusted. It is possible that these expectations loop back into the credit system and affect the lending behaviour of credit institutions or that they impact households’ self-assessment of their opportunities to borrow money. In this paper we study how the process of job polarisation affects credit demand and supply, studying its relationship with credit constraint and credit quality.