Impact of the great rise in finance on resource allocation and employment

Grant description:

The authors will investigate how large increases in household debt affect the allocation of labor across geographical areas and industries. This project is a continuation of their previous research on household debt, and will result in the creation of a new historical county-level panel of household balance sheets and industry-specific employment—a harmonized data set (1946-2012) that will be available to other researchers. A second contribution is a test of whether the run-up in debt led to imbalances in employment, a corollary to the findings in Mian and Sufi (2014) about employment shocks during the Great Recession. A better understanding of the interaction between household debt and structural changes in the allocation of labor could help researchers better identify and understand the root causes behind the labor market slowdown.