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Financial Buffers, Unemployment Duration and Replacement Labor Income

Author

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  • Levander, Mats

    (Financial Stability Department, Central Bank of Sweden)

Abstract

This study examines how the financial buffer of unemployed individuals affects the duration of their unemployment and their replacement income after they find a new position. The analysis is conducted on a highly detailed Swedish dataset that includes information on households' balance sheets. Liquid financial wealth and net wealth both have a positive effect on unemployment duration, which is consistent with the theory that individuals with financial buffers are able to search for new positions for longer periods of time. Moreover, individuals with financial buffers use that extended period of time to search for new positions that offer higher labor income replacement rates.

Suggested Citation

  • Levander, Mats, 2019. "Financial Buffers, Unemployment Duration and Replacement Labor Income," Working Paper Series 379, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0379
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial buffer; mass layoff; unemployment;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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