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

Thomas Sargent and Lars Ljungqvist

No 7822, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The high labor supply elasticity in an indivisible-labor model with employment lotteries emerges also without lotteries when individuals must instead choose career lengths. The more elastic are earnings 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. Government provided social security can attenuate responses of career length to earnings profile slope and earnings shocks by inducing a worker to retire at an official retirement age.

Keywords: Career length; Earnings profile; Earnings shocks; Indivisible labor; Labor supply elasticity; Social security; Taxes (search for similar items in EconPapers)
JEL-codes: E24 J22 J26 (search for similar items in EconPapers)
Date: 2010-05
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