This project is a ROW planning grant for an initial study of how American households' participation in credit markets affects their decisions regarding spending, saving, and working. The focus is on use of installment credit since default on installment contracts result in wealth-reducing repossession of the good being purchased. Household budget surveys from the interwar years (when availability of installment credit became widespread) is analyzed to ascertain the correlation between installment buying and household reliance on more than one wage- earner or on non-wage income; occupational or industrial categories of household workers; saving rate; and debt service to disposable income ratios. In the Great Depression, consumption accounted for disproportionate shares of falls in gross national product. Literary evidence asserts indebted households severely reduced consumption spending to avoid defaulting on installment contracts. This study provides now-lacking evidence on this assertion. Further, the underlying model of household behavior indicates how recent federal tax law changes encouraging home- equity over installment debt may affect labor force participation and household spending decisions.
