Unemployment Risk, Labour Force Participation and Savings
AbstractThis paper analyses labour force participation and precautionary savings in the presence of risks of being fired or failing to secure a job offer when out of the labour market. We use a finite horizon framework with two employment states and a stage utility function which is CARA in consumption but non-separable in leisure. The results are that there is precautionary labour force participation: employment risk lowers the reservation wage; generally it also reduces consumption. However due to the non-separability assumption, precautionary savings, as usually defined, may not be positive. We characterize the reservation wage and contrast the results with those in which the stage utility is additive in leisure and consumption. We extend the analysis to study the effects of cyclical variation in employment risk, of stochastic future wage rates, and of adding a third employment state of search. Copyright The Review of Economic Studies Limited, 2003.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 70 (2003)
Issue (Month): 3 (07)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527
Other versions of this item:
- Gabriella Berloffa & Peter Simmons, 2003. "Unemployment Risk, Labour Force Participation and Savings," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 521-539.
- Gabriella Berloffa & Peter Simmons, 1999. "Unemployment risk, labour force participation and savings," Department of Economics Working Papers 9902, Department of Economics, University of Trento, Italia.
- Gabriella Berloffa & Peter Simmons, . "Unemployment Risk, Labour Force Participation and Savings," Discussion Papers 97/7, Department of Economics, University of York.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Viola Angelini & Peter Simmons, . "Housing Debt, Employment Risk and Consumption," Discussion Papers 05/07, Department of Economics, University of York.
- Viola Angelini & Peter Simmons, . "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.
- Carolina Fugazza, 2012. "Employment Risk over the Life Cycle," Carlo Alberto Notebooks 280, Collegio Carlo Alberto.
- Angelini, Viola, 2009.
"Consumption and habit formation when time horizon is finite,"
Elsevier, vol. 103(2), pages 113-116, May.
- Viola Angelini, 2006. "Consumption and Habit Formation when Time Horizon is Finite," Discussion Papers 06/27, Department of Economics, University of York.
- Wolfgang Nagl, 2013.
"Better safe than sorry? The effects of income risk, unemployment risk and the interaction of these risks on wages,"
ERSA conference papers
ersa13p237, European Regional Science Association.
- Wolfgang Nagl, 2012. "Better Safe than Sorry? The Effects of Income Risk, Unemployment Risk and the Interaction of these Risks on Wages," Ifo Working Paper Series Ifo Working Paper No. 148, Ifo Institute for Economic Research at the University of Munich.
- Orazio P. Attanasio & Guglielmo Weber, 2010.
"Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy,"
Journal of Economic Literature,
American Economic Association, vol. 48(3), pages 693-751, September.
- Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," NBER Working Papers 15756, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.