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The financial labor supply accelerator
The financial labor supply accelerator links hours worked to minimum down payments for durable good purchases. When these constrain a household's debt, a persistent wage increase generates a liquidity shortage. This limits the income effect, so hours worked grow. The mechanism generates a positive comovement of labor supply and household debt, the strength of which depends positively on the minimum down-payment rate. Its potential macroeconomic importance comes from these labor supply fluctuations' procyclicality. This paper examines the comovement of hours worked and debt at the household ...