Job displacement insurance and (the lack of) consumption-smoothing

Francois Gerard and Joana Naritomi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the spending profile of workers who experience both a positive transitory income shock (lump-sum severance pay) and a negative permanent income shock (layoff). Using de-identified expenditure and employment data from Brazil, we show that workers increase spending at layoff by 35 percent despite experiencing a 14 percent long-term loss. We find high sensitivity of spending to cash-on-hand across consumption categories and for several sources of variation, including predictable income drops. A model with present-biased workers can rationalize our findings, and highlights the importance of the timing of benefit disbursement for the consumption-smoothing gains of job displacement insurance policies.

JEL-codes: D12 J63 J65 O12 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2021-03-01
New Economics Papers: this item is included in nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in American Economic Review, 1, March, 2021, 111(3), pp. 899 - 942. ISSN: 0002-8282

Downloads: (external link)
http://eprints.lse.ac.uk/107127/ Open access version. (application/pdf)

Related works:
Journal Article: Job Displacement Insurance and (the Lack of) Consumption-Smoothing (2021)
Working Paper: Job displacement insurance and (the lack of) consumption-smoothing (2019)
Working Paper: Job Displacement Insurance and (the Lack of) Consumption-Smoothing (2019)
Working Paper: Job Displacement Insurance and (the Lack of) Consumption-Smoothing (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:107127

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().