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Saving and portfolio allocation before and after job loss

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  • Christoph Basten
  • Andreas Fagereng
  • Kjetil Telle

Abstract

Using administrative panel data from Norway, we investigate the development of household labor income, nancial wealth and asset holdings over a nine-year period surrounding job loss. Consistent with a simple theoretical model, the data show precautionary saving and a shift toward safer assets in the years leading up to unemployment, and depletion of savings during unemployment. This suggests that at least some households can foresee and prepare for upcoming unemployment, which indicates that private savings can to some extent serve as a substitute for publicly provided unemployment insurance.

Suggested Citation

  • Christoph Basten & Andreas Fagereng & Kjetil Telle, 2012. "Saving and portfolio allocation before and after job loss," KOF Working papers 12-298, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:12-298
    DOI: 10.3929/ethz-a-006999200
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    More about this item

    Keywords

    Unemployment; Precautionary saving; Consumption smoothing; Household portfolios; Portfolio allocation; Optimal unemployment insurance;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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