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Late Career Job Loss And The Decision To Retire

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  • Irina Merkurieva

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.

Suggested Citation

  • Irina Merkurieva, 2019. "Late Career Job Loss And The Decision To Retire," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 259-282, February.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:1:p:259-282
    DOI: 10.1111/iere.12352
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    Cited by:

    1. Holmberg, Johan, 2021. "Earnings and Labor Market Dynamics: Indirect Inference Based on Swedish Register Data," Umeå Economic Studies 984, Umeå University, Department of Economics.
    2. Peter Levell & Matthias Parey & Aitor Irastorza-Fadrique, 2023. "Household responses to trade shocks," IFS Working Papers W23/13, Institute for Fiscal Studies.
    3. Aitor Irastorza-Fadrique & Peter Levell & Matthias Parey, 2024. "Household responses to trade shocks," IFS Working Papers W24/07, Institute for Fiscal Studies.
    4. Rud, Juan-Pablo & Simmons, Michael & Toews, Gerhard & Aragon, Fernando, 2024. "Job displacement costs of phasing out coal," Journal of Public Economics, Elsevier, vol. 236(C).
    5. Yu, Zhixiu, 2024. "Why are older men working more? The role of social security," Journal of Public Economics, Elsevier, vol. 231(C).
    6. Aitor Irastorza-Fadrique & Peter Levell & Matthias Parey, 2024. "Household responses to trade shocks," IFS Working Papers W24/52, Institute for Fiscal Studies.
    7. Siha Lee, 2023. "Spousal Labor Supply, Caregiving, and the Value of Disability Insurance," Department of Economics Working Papers 2020-08, McMaster University.

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