Family events, such as a job loss, the onset of health limitations, and a change in family structure, can adversely affect family well-being. The impact of these events may be mitigated if the family holds assets that can be used to maintain consumption. Using the SIPP, this study examines the role of assets in families' economic stability. We find that families in all parts of the income distribution experience material hardship after a negative event. Further, in the aftermath of a negative event, asset-poor families experience more hardship than non-asset-poor families, with assets helping most for low- and middle-income families.
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Family events, such as a job loss, the onset of
health limitations, and a change in family structure,
can adversely affect economic well-being.
The impact of these events may be mitigated if
the family holds assets that it can draw on to
maintain consumption and material well-being.
This study examines the extent to which families
that hold assets are better able to maintain
their level of material well-being in the face of
adverse events, compared with families that do
not hold assets. In essence, this work looks at the
role of assets in families’ economic and material
stability, a potential benefit of asset-building
programs for low-income families. We use the
1996 and 2001 panels of the Survey of Income
and Program Participation (SIPP) to address two
key research questions: (1) What is the relationship
between events and material hardship? and
(2) Given that an event occurs, do families with
assets have lower levels of material hardship?
We answer the questions by examining the
relationship between events and material hardship
and by looking at the relationship between
asset holdings and material hardship, given that
an event occurs. We also assess the relationships
between adverse events, material hardship, and
asset holdings for families in different parts of
the income distribution.
This study builds on the substantial literature
that examines income volatility (e.g., Burkhauser
and Duncan 1989; Congressional Budget Office
2007; Gottschalk and Moffitt 1994; Haider 2001;
and Nichols and Zimmerman 2008) and another
literature that examines how life events contribute
to income losses, recoveries, or poverty status
(e.g., Acs, Loprest, and Nichols 2009; Bane and
Ellwood 1986; Gosselin and Zimmerman 2008;
and McKernan and Ratcliffe 2005).1 This study
builds on these literatures by examining how asset
holdings cushion the blow of negative life events,
a key hypothesis in the asset-building literature.
Our results suggest that assets do help families
cope with adverse events.
- Families that experience a negative event—
such as an involuntary job loss, onset of a
health-related work limitation, or a parent
leaving the family—are significantly more
likely to experience material hardship.
- Families in all parts of the income distribution
experience material hardship after a negative
event occurs, but more low-income families
- In the aftermath of a negative event, assetpoor
families experience more hardship than
non-asset-poor families. Assets help both in
the bottom and middle thirds of the income
distribution and help less in the top third of
the income distribution.
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