Searching for Job Security and the Consequences of Job Loss

Gregor Jarosch

No 28481, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Job loss comes with large present value earnings losses which elude workhorse models of unemployment and labor market policy. I propose a parsimonious model of a frictional labor market in which jobs differ in terms of unemployment risk and workers search off- and on-the-job. This gives rise to a job ladder with slippery bottom rungs where unemployment spells beget unemployment spells. I allow for human capital to respond to time spent out of work and estimate the framework on German Social Security data. The model captures the joint response of wages, employment, and unemployment risk to job loss which I measure empirically. The key driver of the “unemployment scar” is the loss in job security and its interaction with the evolution of human capital.

JEL-codes: E24 J3 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ias, nep-lma and nep-mac
Note: EFG
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