Working Papers: All

We're building an archive of the key working papers on the social and economic effects of the downturn. Check back later for even more offerings!


How Has the Financial Crisis Affected the Finances of Older Households?

  • Authors: Richard W. Kopcke, Anthony Webb
  • Date: June 6, 2012
This brief considers the impact of recent declines in stock prices and nominal interest rates on older households, examining the effect of the crisis on the financial wealth of older households, the impact of the financial crisis on the investment and total incomes of retired households, and the impact of the financial crisis on lifetime consumption.

The Labor Market Four Years Into the Crisis: Assessing Structural Explanations

  • Author: Jesse Rothstein
  • Date: May 5, 2012
Four years after the beginning of the Great Recession, the labor market remains historically weak. Many observers have concluded that "structural" impediments to recovery bear some of the blame. This paper reviews such structural explanations. I find that there is little evidence supporting these hypotheses, and that the bulk of the evidence is more consistent with the hypothesis that continued poor performance is primarily attributable to shortfalls in the aggregate demand for labor.

Age Disparities in Unemployment and Reemployment during the Great Recession and Recovery

  • Authors: Richard W. Johnson, Barbara A. Butrica
  • Date: June 6, 2012
The surge in unemployment that accompanied and followed the Great Recession - the economic downturn that began in December 2007 and lasted until June 2009 - did not spare either younger or older workers. Nonetheless, age affected how workers fared during the slowdown. Layoffs were less common among older workers who had many years of service with their employers than among their younger counterparts who had less seniority, but older adults took longer to find work when they lost their jobs. Wage losses were especially steep for unemployed workers in their fifties who became reemployed.

Caught in the housing bubble: Immigrants' housing outcomes in traditional gateways and newly emerging destinations

  • Authors: Gary Painter, Zhou Yu
  • Date: October 10, 2012
Research has documented that immigrants have moved in large numbers to almost every metropolitan area and select rural areas in the country (e.g., Lichter and Johnson 2009; Painter and Yu 2010). In the midst of these demographic shifts, the country has experienced a profound recession. To date, there has been little research on the impact of the recession on immigrants across the country. Using the 2006 and 2009 American Community Survey microdata, we assess how the recent economic crisis has affected immigrants with respect to three housing outcomes (residential mobility, homeownership, and household formation) to compare housing outcomes at two important time points in the recent economic cycle. The results suggest the early impact of the recession has not been as severe on immigrants as one might expect. In particular, the places where immigrant populations are newest have not experienced reductions in homeownership as those in the large immigrant gateways. Even in the established gateways, the decline in homeownership has been smaller for immigrants than for native-born households. Regression results suggest that the negative impacts from the recession are strongest in the gateway metropolitan areas, and that after controlling for residence in the hardest hit areas, changes in unemployment rates and increases in metropolitan level default rates have a negative impact on homeownership rates.

Tax Structure and Revenue Instability: The Great Recession and the States

  • Authors: Howard Chernick, Cordelia Reimers, Jennifer Tennant
  • Date: March 3, 2013
Though the great recession has had the most severe overall effect on state tax revenues of any downturn since the Great Depression, impacts varied widely across states. Tax revenues were affected through two different channels. The first is due to the collapse in realized capital gains income following the sharp decline in the stock market. State tax bases are affected in proportion to pre-recession reliance on capital gains income, in turn closely associated with the degree of income concentration. Largely due to capital gains income, the income of high-income taxpayers is more cyclically sensitive than that of lower-income taxpayers. The second channel, the differential effect on state output and employment, has its greatest impact on incomes below the top 5 percent of the distribution. We hypothesize that variation in revenue impact across states is due to differences in the severity of the income shocks at different levels of income, the degree of income inequality, the importance of capital gains in top incomes, and the level and progressivity of tax burdens. Progressive states are likely to be more vulnerable to revenue losses in economic downturns. Progressivity and income volatility may interact to amplify the recession’s fiscal impact.

How Does the Composition of Disability Insurance Applicants Change Across Business Cycles?

  • Authors: Norma B. Coe, Matthew S. Rutledge
  • Date: March 3, 2013
Much as in previous recessions, the number of applications to public disability insurance programs increased sharply during the Great Recession. We find that the composition of applicants also changes across business cycles. For example, applicants during economic downturns, and especially during the Great Recession, are younger, better educated, higher income, and more likely to have recent work experience. However, we find only mixed evidence supporting the theory that the increase in applications in downturns is caused by healthier applicants who apply to disability programs only because they are unemployed.

Great Recession-Induced Early Claimers: Who Are They? How Much Do They Lose?

  • Authors: Matthew S. Rutledge, Norma B. Coe
  • Date: March 3, 2013
During the Great Recession, more older workers have claimed Social Security benefits early. This paper addresses two important policy questions: Who are these early claimers? How much retirement income have they lost as a result of claiming early? Using the Health and Retirement Study (HRS) we estimate a discrete-time hazard model that makes claiming Social Security benefits a function of age, personal characteristics, and the national unemployment rate. We project that high unemployment rates during the Great Recession led to a 5-percentage-point increase in the probability of claiming early relative to a less severe recession such as the 2001-2003 downturn, and this increase was nearly uniform across socioeconomic groups. Our estimates also suggest that while the Great Recession did impact the claiming decision, it did not cause a dramatic change in benefits. “Great Recession Claimers” – those whom we simulate were likely to claim early during the Great Recession but would not have in a milder downturn – filed for Social Security only 6 months earlier, on average, than they would have in a minor recession. This modest change in timing reduced their monthly Social Security benefit checks by $56, or 4.6 percent of average monthly benefits, and the Social Security replacement rate fell by 1.7 percentage points relative to a more typical recession. The benefit reduction resulted from the combined effect of the actuarial reduction for early claiming and the foregone opportunity to continue working and increase the wage base used for calculating benefits.

State-Local Pension Costs: Pre-Crisis, Post-Crisis, and Post-Reform

  • Authors: Alicia H. Munnell, Jean-Pierre Aubry, Anek Belbase, Joshua Hurwitz
  • Date: February 2, 2013
State and local governments have been facing an extraordinarily difficult fiscal environment in recent years. One of many challenges has been restoring public pension plans to a sound fiscal footing after the economic crisis of 2007-09. States have begun to respond by enacting a mix of revenue increases and benefit cuts. These changes will, over time, improve the financial outlook for plans and help ease their impact on other budget priorities. This study analyzes the nature and magnitude of these effects by analyzing pension costs before the financial crisis, after the financial crisis, and after reforms for a sample of 32 plans in 15 states. The results show that most of the sample plans responded with significant pension reforms, generally increasing employee contributions and lowering benefits for new employees; the changes were largest for plans with serious underfunding and those with generous benefits; in most cases, reforms fully offset or more than offset the impact of the financial crisis on the sponsors’ annual required contribution; and employer contributions to accruing benefits for new employees were cut in half, sharply lowering compensation for future workers. In short, states have made more changes than commonly thought. Whether these changes stick or not is an open question.

Recession Depression: Mental Health Effects of the 2008 Stock Market Crash

  • Authors: Melissa McInerney, Jennifer M. Mellor, Lauren Hersch Nicholas
  • Date: February 2, 2013
How do sudden, large wealth losses affect mental health? Most prior studies of the causal effects of material well-being on health use identification strategies involving income increases; these studies as well as prior research on stock market accumulations may not inform this question if the effect of wealth on health is asymmetric. We use exogenous variation in the interview dates of the 2008 Health and Retirement Study to assess the impact of large wealth losses on mental health among older U.S. adults. We compare cross-wave changes in wealth and health for respondents interviewed before and after the October 2008 stock market crash. We find that the crash reduced wealth and increased depressive symptoms and the use of anti-depressants. These results suggest that sudden wealth losses cause immediate declines in mental health; for example, a loss of $50,000 of non-housing wealth increases the likelihood of feeling depressed by 1.35 percentage points, or by 8%.

The Great Recession and the Social Safety Net

  • Author: Robert A. Moffitt
  • Date: April 4, 2013
The social safety net responded in significant and favorable ways during the Great Recession. Aggregate per capita expenditures grew significantly, with particularly strong growth in the SNAP, EITC, UI, and Medicaid programs. Distributionally, the increase in transfers was widely shared across demographic groups, including families with and without children, single-parent and two-parent families. Transfers grew as well among families with more employed members and with fewer employed members. However, the increase in transfer amounts was not strongly progressive across income classes within the low-income population, increasingly slightly more for those just below the poverty line and those just above it, compared to those at the bottom of the income distribution. This is mainly the result of the EITC program, which provides greater benefits to those with higher family earnings. The expansions of SNAP and UI benefitted those at the bottom of the income distribution to a greater extent.