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The Simple Analytics Of Job Displacement Insurance

Author

Listed:
  • Donald O. Parsons

Abstract

Job displacement is a threat to the earnings of long‐tenured workers through (1) unemployment spells and (2) reduced reemployment wages. Although full insurance requires both unemployment benefits and wage insurance, supply difficulties limit actual‐loss insurance, and separation packages include partial unemployment insurance and scheduled (fixed sum) severance pay. The design of this two‐dimensional package requires a systems approach as well as a generalized replacement ratio measure of adequacy. Job search moral hazard and layoff moral hazard (firing costs) introduce serious contracting concerns. Economic theory provides a guide to the integration of these insurance instruments in this complex planning environment.

Suggested Citation

  • Donald O. Parsons, 2019. "The Simple Analytics Of Job Displacement Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(2), pages 351-380, June.
    • Handle: RePEc:bla:jrinsu:v:86:y:2019:i:2:p:351-380
    DOI: 10.1111/jori.12216
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    Cited by:

    1. François Gerard & Joana Naritomi, 2021. "Job Displacement Insurance and (the Lack of) Consumption-Smoothing," American Economic Review, American Economic Association, vol. 111(3), pages 899-942, March.
    2. Donald O. Parsons, 2018. "Compensating displaced workers," World of Labour, LISER, pages 444-444, September.
    3. Robert Dur & Heiner Schmittdiel, 2019. "Paid to Quit," De Economist, Springer, vol. 167(4), pages 387-406, December.

    More about this item

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies

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