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Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession
Author(s) -
BERNSTEIN SHAI,
MCQUADE TIMOTHY,
TOWNSEND RICHARD R.
Publication year - 2021
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12976
Subject(s) - productivity , shock (circulatory) , metropolitan area , recession , economics , labour economics , wealth effect , affect (linguistics) , financial distress , balance sheet , financial crisis , great recession , demographic economics , monetary economics , finance , economic growth , macroeconomics , financial system , monetary policy , medicine , linguistics , philosophy , pathology
We investigate how the deterioration of household balance sheets affects worker productivity, and in turn economic downturns. Specifically, we compare the output of innovative workers who experienced differential declines in housing wealth during the financial crisis but were employed at the same firm and lived in the same metropolitan area. We find that, following a negative wealth shock, innovative workers become less productive and generate lower economic value for their firms. The reduction in innovative output is not driven by workers switching to less innovative firms or positions. These effects are more pronounced among workers at greater risk of financial distress.