Sciences Po Spire - Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss

Type:		Article

Title:		Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss

Author(s):		Stancanelli, Elena - Théorie économique, modélisation et applications (THEMA) (Author) Bloemen, Hans (Author)

In:		International Economic Review

Date issued:		2005-08

Publisher:		UNITED STATES

ISSN:		00206598

Abstract:		One of the reasons for setting up an unemployment insurance scheme is to allow job losers to smooth consumption. We test for the impact of unemployment benefits on changes in household food expenditure of individuals who have recently experienced a job loss. We also study the relationship between unemployment benefits and the financial wealth of the unemployed. From our empirical analysis we conclude that, for households without financial wealth at the time of job loss, unemployment benefits help to smooth food consumption. For households running debt before job loss, there is evidence that lower replacement rates lead to a postponement of debt repayment.

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