Brown Bag seminar in Economics | Frank Leenders
Welcome to the Brown Bag Seminar in Economics organized by the Department of Economics, SSE. The seminar speaker is Frank Leenders, SSE who will present
"Social Security and Life-Cycle Variation in the Cost of Job Loss" (joint with Johanna Wallenius)
In this paper, we study how the effect of displacement on subsequent earnings and employment differs by the worker's age at the time of the displacement. Furthermore, we investigate the extent to which this life-cycle variation is driven by the design of the social security system. Using German social security data, we find that the earnings losses, both upon impact and in the long run, generally increase in age. Employment loss, on the other hand, increases in age only until workers approach the window for early retirement. We develop a life-cycle model with search frictions, human capital, and savings, which contains a detailed representation of the German unemployment insurance, welfare, and pension systems. The model is used to decompose the life-cycle variation in earnings and employment losses. We find that the age-dependencies embedded in the social security system, along with mortality risk and age-dependent job finding rates, are important in accounting for the age gradients in post-displacement earnings and employment losses, especially later in the working life. Furthermore, while displacement comes at a high welfare cost, workers are able to effectively shield themselves from some of this cost through unemployment insurance and asset accumulation. Finally, while workers with high lifetime income tend to retire early, job loss tends to nudge these workers to postpone their retirement.
Frank Leenders is a Postdoc Fellow at SSE, in the Department of Economics.
This seminar takes place at Stockholm School of Economics, Sveavägen 65, in room A320.
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