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The Long-Run Cost of Job Loss as Measured by Consumption Changes

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  • Martin Browning
  • Thomas F. Crossley

Abstract

The costs of involuntary job loss are of substantial research and policy interest. We consider the measurement of the cost of job displacement with household expenditure data. With a Canadian panel survey of individuals who experienced a job separation, we compare the consumption growth of households that experienced a permanent layoff to a control group of households that experienced a temporary layoff with known recall date. Because the firms employing the latter group are providing insurance, these workers approximate a bench mark of full insurance against job loss shocks. We estimate that permanent layoffs experience an average consumption loss of between 4 and 10 percent. Older workers and workers with high job tenure have losses closer to the top of this range.

Suggested Citation

  • Martin Browning & Thomas F. Crossley, 2006. "The Long-Run Cost of Job Loss as Measured by Consumption Changes," Social and Economic Dimensions of an Aging Population Research Papers 152, McMaster University.
    • Handle: RePEc:mcm:sedapp:152
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    Cited by:

    1. Martin Browning & Thomas F. Crossley & Guglielmo Weber, 2003. "Asking consumption questions in general purpose surveys," Economic Journal, Royal Economic Society, vol. 113(491), pages 540-567, November.
    2. Selçuk Bedük, 2023. "Insured Privately? Wealth Stratification of Job Loss in the UK," Social Inclusion, Cogitatio Press, vol. 11(1), pages 135-147.
    3. Philipp vom Berge & Achim Schmillen, 2023. "Effects of mass layoffs on local employment—evidence from geo-referenced data," Journal of International Economic Law, Oxford University Press, vol. 23(3), pages 509-539.
    4. Philipp vom Berge & Achim Schmillen, 2023. "Effects of mass layoffs on local employment—evidence from geo-referenced data," Journal of Economic Geography, Oxford University Press, vol. 23(3), pages 509-539.
    5. Lepage-Saucier, Nicolas, 2016. "The consumption response to temporary layoffs and hours losses," Labour Economics, Elsevier, vol. 41(C), pages 177-193.
    6. Hardy, Morgan & Kagy, Gisella & Demeke, Eyoual & Witte, Marc & Meyer, Christian Johannes, 2024. "The impact of firm downsizing on workers: Evidence from Ethiopia’s ready-made garment industry," World Development, Elsevier, vol. 176(C).
    7. Edouard Djeutem & Mario He & Abeer Reza & Yang Zhang, 2022. "Household Heterogeneity and the Performance of Monetary Policy Frameworks," Staff Working Papers 22-12, Bank of Canada.
    8. S. Elif Filiz, 2016. "Mothers’ Involuntary Job Loss and Children’s Academic Achievement," Journal of Labor Research, Springer, vol. 37(1), pages 98-127, March.
    9. Achim D. Schmillen, 2020. "Causes and Impacts of Job Displacements and Public Policy Responses," World Bank Publications - Reports 33720, The World Bank Group.
    10. Ilias Georgakopoulos, 2019. "Wealth Effects on Consumption in Malta: Evidence from Household Level Data," Applied Economics and Finance, Redfame publishing, vol. 6(4), pages 28-35, July.
    11. Aaronson, Daniel & Agarwal, Sumit & Hotchkiss, Julie L. & Kelley, Taylor, 2019. "Job displacement and financial outcomes," Economics Letters, Elsevier, vol. 177(C), pages 18-21.
    12. MAMOUDOU Ba & Mazhar Mughal, 2022. "Weather Shocks, Coping Strategies and Household Well-being: Evidence from Rural Mauritania," Journal of Development Studies, Taylor & Francis Journals, vol. 58(3), pages 482-502, March.
    13. Vom Berge, Philipp & Schmillen, Achim, 2015. "Direct and indirect effects of mass layoffs : evidence from geo-referenced data," IAB-Discussion Paper 201511, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. Martin Hauptfleisch, 2019. "Financial Decision-Making Using Data," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 6-2019, January-A.
    15. Parsons, Donald O., 2014. "Job Displacement Insurance: An Overview," IZA Discussion Papers 8223, Institute of Labor Economics (IZA).
    16. Jim Been & Eduard Suari‐Andreu & Marike Knoef & Rob Alessie, 2024. "Consumption and time use responses to unemployment: Implications for the lifecycle model," Economica, London School of Economics and Political Science, vol. 91(361), pages 1-32, January.
    17. Bronchetti, Erin Todd, 2012. "Workers' compensation and consumption smoothing," Journal of Public Economics, Elsevier, vol. 96(5), pages 495-508.
    18. Been, J.; & Suari-Andreu, E.; & Knoef, M.;, 2022. "The short-run effects of unexpected job loss on health," Health, Econometrics and Data Group (HEDG) Working Papers 22/21, HEDG, c/o Department of Economics, University of York.

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    More about this item

    Keywords

    Job Displacement; Consumption;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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