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Late career job loss and the decision to retire

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RetJobLoss.pdf (315.7Kb)
Date
15/02/2019
Author
Merkurieva, Irina
Keywords
Retirement
Life-cycle labor supply
Layoff cost
Saving
Cyclical unemployment
HD28 Management. Industrial Management
3rd-NDAS
BDC
R2C
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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.
Citation
Merkurieva , I 2019 , ' Late career job loss and the decision to retire ' , International Economic Review , vol. 60 , no. 1 , pp. 259-282 . https://doi.org/10.1111/iere.12352
Publication
International Economic Review
Status
Peer reviewed
DOI
https://doi.org/10.1111/iere.12352
ISSN
0020-6598
Type
Journal article
Rights
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
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/20761

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