Household consumption responses to unanticipated labor market transitions

Abstract We study the under-explored effects of transitions from unemployment to employment on household consumption and income, and compare them with the effects of transitions from employment to unemployment, which have received much more attention. The analysis is extended to see if the effect of these labor market transitions depend on the number of unemployed household members, the phase of the business cycle, and the moderation effect of gender. To conduct this research, we use the combination of Inverse Probability Weighting (IPW) and difference-in-differences (DID) methods suggested by Abadie (2005), and use survey weights as in Ridgeway et al. (2015) to attain external validity.