Saving and portfolio allocation before and after job loss
Title: Saving and portfolio allocation before and after job loss
Citation: Journal of money, credit and banking, 2016, Vol. 48, No. 2-3, pp. 249–568
ISSN: 0022-2879; 1538-4616
We investigate the development of household labor income, financial wealth, and asset holdings over a 9-year period around job loss, using unique administrative panel data from Norway. Consistent with predictions from theory, the data show additional saving and a shift toward safer assets in the years leading up to unemployment, and depletion of savings after job loss. In the years after job loss, the households' after-tax labor income is reduced by about USD 12,500. Over the same time period, households deplete USD 3,000 of their financial assets, of which one third is accumulated prior to the job loss. This suggests that at least some households can foresee and prepare for the upcoming unemployment, which indicates that private savings can, to some extent, serve as a substitute for publicly provided unemployment insurance.
Subject: unemployment, consumption smoothing, household portfolios, portfolio allocation, optimal unemployment insurance
First published online: 14 March 2016
Type of Access: embargoedAccess
Initial version: http://hdl.handle.net/1814/21720
Version: Article is the published version of a chapter (2) of the author's EUI PhD thesis, 2012
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