LATE CAREER JOB LOSS AND THE DECISION TO RETIRE

TitleLATE CAREER JOB LOSS AND THE DECISION TO RETIRE
Publication TypeJournal Article
Year of Publication2019
AuthorsMerkurieva, I
JournalInternational Economic Review
Volume60
Pagination259-282
Abstract

Abstract This article provides an empirical analysis of the effect of involuntary job loss on the lifetime income and labor supply of older workers. I develop and estimate a dynamic programming model of retirement with savings, costly job search, and exogenous layoffs. The average cost of job loss is equivalent to one year of predisplacement earnings, 70% due to the wage reduction and 30% to the search frictions. Displaced workers on average retire 14 months earlier. Workers who approached retirement during the Great Recession will work approximately five months longer in response to the contemporaneous financial and labor market shocks.

DOI10.1111/iere.12352
Citation Keyhttps://doi.org/10.1111/iere.12352