TY  - BOOK
AU  - Braxton,J.Carter
AU  - Herkenhoff,Kyle F.
AU  - Phillips,Gordon M.
ED  - National Bureau of Economic Research.
TI  - Can the Unemployed Borrow? Implications for Public Insurance
T2  - NBER working paper series
PY  - 2020///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - April 2020; Hardcopy version available to institutional subscribers
N2  - We show that unemployed individuals maintain significant access to credit. Following job loss, the unconstrained borrow, while the constrained default and delever. Both defaulters and borrowers are using credit to smooth consumption. We quantitatively show that long-term credit relationships and credit-registries allow the unemployed to partially offset income losses using credit. We estimate the model and find that the optimal provision of public insurance is unambiguously lower with greater credit access. Using a utilitarian welfare criterion, the optimal steady-state policy is to lower the replacement rate of public insurance from the current US policy of 41.2% to 38.3%. Moreover, lowering the replacement rate to 38.3% yields welfare gains to the majority of workers along the transition path
UR  - https://www.nber.org/papers/w27026
UR  - http://dx.doi.org/10.3386/w27026
ER  -