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Career Length: Effects of Curvature of Earnings Profiles, Earnings Shocks, Taxes, and Social Security

  • Lars Ljungvist

    (Stockholm School of Economics)

  • Thomas Sargent

    (New York University)

The same high labor supply elasticity that characterizes a representative family model with indivisible labor and employment lotteries can also emerge without lotteries when self-insuring individuals choose career lengths. Off corners, the more elastic the earnings profile is to accumulated working time, the longer is a worker's career. Negative (positive) unanticipated earnings shocks reduce (increase) the career length of a worker holding positive assets at the time of the shock, while the effects are the opposite for a worker with negative assets. By inducing a worker to retire at an official retirement age, government provided social security can attenuate responses of career lengths to earnings profile slopes, earnings shocks, and taxes. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2013.04.001
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 17 (2014)
Issue (Month): 1 (January)
Pages: 1-20

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Handle: RePEc:red:issued:12-92
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