The Two-Income Trap: Are Two-Earner Households More Financially Vulnerable?
June 2019
Working Paper Number:
CES-19-19
Abstract
We test whether two-earner married couples are more likely to file for consumer bankruptcy in the future than similar married couples. Since two-earner households are unable to adjust their income on the extensive margin, they are more vulnerable to income shocks, and thus at risk of bankruptcy in the future. We find that two-earner married couples in 1999 are more likely to file for bankruptcy from 2002-2004 compared to other married couples. Additionally, we present supporting information that suggests that two-earner households have a higher average propensity to consume.
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