How Households Self-Insure Against Job Loss: Insights from Data
How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Datasets
Researchers have used data from a large bank and government sources to understand how households cope with job loss. Over a two-year period, households reduce their spending by 30% of the income they lose due to job loss. The primary method of self-insurance is through adjustments of liquid balances, accounting for 50% of the income loss. Other methods, such as changes in spousal labor supply, private transfers, home equity extraction, mortgage refinancing, and consumer credit, play smaller roles in self-insurance. These findings also reveal that self-insurance methods vary based on household characteristics.
Andersen, Asger Lau, Amalie Sofie Jensen, Niels Johannesen, Claus Thustrup Kreiner, Søren Leth-Petersen, and Adam Sheridan. 2023. “How Do Households Respond to Job Loss? Lessons from Multiple High-Frequency Datasets.” American Economic Journal: Applied Economics, 15 (4): 1-29.
