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Saving and portfolio allocation before and after job loss

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  • Christoph Basten
  • Andreas Fagereng
  • Kjetil Telle

    ()
    (Statistics Norway)

Abstract

Using administrative panel data from Norway, we investigate the development of household labor income, financial wealth and asset holdings over a nine-year period surrounding job loss. Consistent with a simple theoretical model, the data show precautionary saving and a shift toward safer assets in the years leading up to unemployment, and depletion of savings during unemployment. This suggests that at least some households can foresee and prepare for upcoming unemployment, which indicates that private savings can complement publicly provided unemployment insurance.

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File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp672.pdf
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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 672.

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Date of creation: Jan 2012
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Handle: RePEc:ssb:dispap:672

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Keywords: unemployment; precautionary saving; consumption smoothing; household portfolios; portfolio allocation; optimal unemployment insurance;

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  1. Hans G. Bloemen & Elena G. F. Stancanelli, 2005. "Financial Wealth, Consumption Smoothing and Income Shocks Arising from Job Loss," Economica, London School of Economics and Political Science, vol. 72(3), pages 431-452, 08.
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  3. Kristiina Huttunen & Jarle Møen & Kjell G. Salvanes, 2011. "How Destructive Is Creative Destruction? Effects Of Job Loss On Job Mobility, Withdrawal And Income," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 840-870, October.
  4. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
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  6. Martin Browning & Thomas Crossley, 1999. "Unemployment Insurance Benefit Levels and Consumption Changes," CEPR Discussion Papers 405, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Nicola Fuchs-Schündeln & Matthias Schündeln, 2005. "Precautionary Savings and Self-Selection: Evidence from the German Reunification "Experiment"," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 1085-1120, August.
  8. Luigi Guiso & Charles Gottlieb & Andreas Fagereng, 2012. "Asset Market Participation and Portfolio Choice over the Life-Cycle," 2012 Meeting Papers 783, Society for Economic Dynamics.
  9. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, vol. 113(484), pages 190-206, January.
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  11. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-72, March.
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  14. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 1999. "Unemployment risk and precautionary wealth: evidence from households' balance sheets," Finance and Economics Discussion Series 1999-15, Board of Governors of the Federal Reserve System (U.S.).
  15. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
  16. Till von Wachter & Jae Song & Joyce Manchester, 2008. "Long-Term Earnings Losses due to Job Separation During the 1982 Recession: An Analysis Using Longitudinal Administrative Data from 1974 to 2004," Discussion Papers 0708-16, Columbia University, Department of Economics.
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Cited by:
  1. Zaman, Rubaiya & Carannate, Maria & Ferra, Emi, 2013. "Effects of Uncertainty on Household Saving Rate," MPRA Paper 51208, University Library of Munich, Germany.
  2. Christoph Basten & Andreas Fagereng & Kjetil Telle, 2012. "Cash-on-Hand and the duration of job search. Quasi-experimental evidence from Norway," Discussion Papers 679, Research Department of Statistics Norway.
  3. Marcus Klemm, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 0380, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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