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Social security and life‐cycle variation in the cost of job loss

This paper study how the effect of displacement on subsequent earnings and employment differs by the worker's age. Using a life-cycle model and German social security data, the authors investigate the extent to which the design of social security drives this variation.

20. desember 2024

The authors find age-dependent job finding rates and the age-dependencies embedded in the social security system to be important in accounting for the age gradients in postdisplacement earnings and employment losses. Furthermore, workers are able to effectively shield themselves against the welfare cost of displacement through unemployment insurance and savings. Finally, job loss heterogeneously nudges workers to change their retirement timing.