Nber Working Paper Series the Dynamics of Work and Debt
نویسندگان
چکیده
This paper characterizes the labor supply and borrowing of a household facing collateral requirements that limit its debt and compel it to accumulate equity in its durable goods stock. The household's discount rate exceeds the market rate of interest, so it would otherwise finance increased current consumption by borrowing against future wages. Collateral constraints generate a positive comovement between the household's debt, the stock of durable goods and labor supply following wage or interest rate shocks---as the household's labor supply adjusts to finance downpayments on new durable good purchases and the subsequent debt repayment. Increasing the speed of debt repayment amplifies these movements. Jeffrey R. Campbell Federal Reserve Bank of Chicago 230 South LaSalle Street Chicago, IL 60604 and NBER [email protected] Zvi Hercowitz Eitan Berglas Scholl of Economics Tel Aviv University P.O.B. 39040 Ramat Aviv, Tel Aviv 69978 ISRAEL [email protected]
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