Spending behaviour in unemployment does not fit with rational models – paper

unemployment-job-loss

People who are unemployed do not exhibit the behaviour typically assumed by standard economic models, according to a paper published in early January by the National Bureau of Economic Research.

The NBER working paper (an earlier version is also available subscription-free), by Peter Ganong and Pascal Noel, draws on anonymised US bank account data to study how unemployed people make spending choices.

The authors find people curtail their spending when they become unemployed, but not enough to

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