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Author:Mustre-del-Rio, Jose 

Working Paper
Consumption in the Great Recession: The Financial Distress Channel

During the Great Recession, the collapse of consumption across the U.S. varied greatly but systematically with house-price declines. We find that financial distress among U.S. households amplified the sensitivity of consumption to house-price shocks. We uncover two essential facts: (1) the decline in house prices led to an increase in household financial distress prior to the decline in income during the recession, and (2) at the zip-code level, the prevalence of financial distress prior to the recession was positively correlated with house-price declines at the onset of the recession. Using ...
Working Papers , Paper 2019-25

Working Paper
Consumption in the Great Recession: The Financial Distress Channel

During the Great Recession, the collapse of consumption across the US varied greatly but systematically with house-price declines. Our message is that household financial health matters for understanding this relationship. Two facts are essential for our finding: (1) the decline in house prices led to an increase in household financial distress (FD) prior to the decline in income during the recession, and (2) at the zip-code level, the prevalence of FD prior to the recession was positively correlated with house-price declines at the onset of the recession. We measure the power of the ...
Working Paper , Paper 19-13

Working Paper
The Persistence of Financial Distress

Using recently available proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in the life cycle, most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of the life cycle, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of ...
Working Paper , Paper 17-14

Blog
COVID-19 and Financial Distress: Employment Vulnerability

The burden of COVID-19 will likely be borne unevenly, with the largest financial burdens potentially hitting populations already vulnerable to economic shocks.
On the Economy

Blog
COVID-19 and Financial Distress: Vulnerability to Infection and Death

Although COVID-19 initially spread faster in areas with low financial distress, evidence suggests that infections may spread most rapidly in highly financially distressed areas moving forward.
On the Economy

Blog
How Will COVID-19 Affect the Spending of Financially Distressed Households?

Consumer spending will drop substantially due to COVID-19, and the declines will hit hardest in households already in financial distress.
On the Economy

Blog
How will COVID-19 Affect Financial Assets, Delinquency and Bankruptcy?

Communities with greater financial distress will face larger income shocks caused by COVID-19 and are less prepared to weather them, while also being more likely to go into further financial distress as the pandemic continues.
On the Economy

Working Paper
Financial frictions and occupational mobility

An important risk faced by individuals is labor income risk associated with changes in demand for an individual?s selected occupation. This risk reflects uncertainty about future income on the current job. As an example, the declining competitiveness of the U.S. automobile or steel sectors are events that are unanticipated from the perspective of a worker, yet have a strong bearing on future labor income for these workers. One way to limit labor income risk is by switching occupations. This, however, is costly because of retraining costs, forgone earnings, and lost occupational specific ...
Research Working Paper , Paper RWP 12-06

Working Paper
Search with wage posting under sticky prices

Research Working Paper , Paper RWP 14-17

Working Paper
The aggregate implications of individual labor supply heterogeneity

This paper examines the Frisch elasticity at the extensive margin of labor supply in an economy consistent with the observed dispersion in average employment rates across individuals. An incomplete markets economy with indivisible labor is presented where agents differ in their disutility of labor and market skills. The model's key parameters are estimated using indirect inference with panel data from the National Longitudinal Survey of the Youth-NLSY. The estimated model implies an elasticity of aggregate employment of 0.71. A simple decomposition reveals that labor disutility dierences, ...
Research Working Paper , Paper RWP 11-09

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