Asset and Debt Accumulation: Labor Market Risk Matters

Francois Fontaine is a labor economist who published in American Economic Review, Journal of International Economics, among others.

Some information and suggestions:

• If you want to attend this online seminar, you need to register here. You will then be sent by email the details of the zoom session.
• Your microphone will be on mute upon joining the meeting, please leave it like that and unmute it only if you want to ask a question.
• Asking questions: please just go ahead and ask questions in the “usual way” (ie, don’t use the chat unless you want to notify me/host of any problem related to seminar.
• Please use the registration form to register for a Zoom bilateral on Monday.
• Please request a bilateral before Thursday 5 November, 09h00.

---------

Abstract

We use administrative data on individual balance sheets in Denmark to document how an individual’s financial position affects job search behavior. We look at the effect of wealth at the entry into unemployment on the exit rate from unemployment as well as the effect on the subsequent match quality. The detailed data allows us not only to distinguish between liquid and illiquid parts, but also to decompose each of them into assets and liabilities. The decomposition of wealth into these four components is key to understanding how wealth affects job finding rates. In particular, we show that liquid assets reduce the probability of becoming re-employed, but we do not see an effect of liquid liabilities or the illiquid wealth components, while interest payments speed up re-employment. The results on subsequent match quality in form of job duration and wages are mixed.