Simulation study of the financial fragility of American renter families

This study examines the financial fragility of renter families in the United States by projecting incidence of destitution among them in face of one form of transitory income loss due to unemployment. Projections are done using a microsimulation model that traces the rise or fall of the financial assets of households as the employment status of habitual earners in these families change. Results of the simulation program are examined using typical and prevailing unemployment rates and extreme business cycle situations. Findings show that periods of high unemployment rate lengthen the duration of unemployment spells of earners and result in asset decumulation. Some families will be unable to cover their expenditures during these unemployment spells and will suffer destitution. In addition, results show the impact of the length and severity of recessions on bankruptcy of families. This study also examines to what extent increase or decrease in household debt burden affects bankruptcy of families and provides a demographic and financial portfolio of families that are at risk of destitution.