Abstract
This article provides an empirical analysis of the effect of involuntary job loss on the lifetime income and labor supply of older workers. I develop and estimate a dynamic programming model of retirement with savings, costly job search and exogenous layoffs. The average cost of job loss is equivalent to one year of pre-displacement earnings, 70% due to the wage reduction and 30% to the search frictions. Displaced workers on average retire fourteen months earlier. Workers who approached retirement during the Great Recession will work approximately five months longer in response to the contemporaneous financial and labor market shocks.
| Original language | English |
|---|---|
| Pages (from-to) | 259-282 |
| Journal | International Economic Review |
| Volume | 60 |
| Issue number | 1 |
| Early online date | 12 Oct 2018 |
| DOIs | |
| Publication status | Published - 15 Feb 2019 |
Keywords
- Retirement
- Life-cycle labor supply
- Layoff cost
- Saving
- Cyclical unemployment
Access to Document
- RetJobLoss
Copyright © 2018 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1111/iere.12352
