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Cash-on-Hand and the Duration of Job Search

Author

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  • Christoph Carl Basten
  • Andreas Fagereng
  • Kjetil Telle

Abstract

We identify the causal effect of lump-sum severance payments on non-employment duration in Norway by exploiting a discontinuity in eligibility at age 50. We find that a severance payment worth 1.2 months' earnings at the median lowers the fraction re-employed after a year by six percentage points. Data on household wealth enable us to verify that the effect is decreasing in prior wealth, which supports the view that the severance pay effect should be interpreted as evidence of liquidity constraints. Finding liquidity constraints in Norway, despite its equitable wealth distribution and generous welfare state, means they are likely to exist also in other countries.

Suggested Citation

  • Christoph Carl Basten & Andreas Fagereng & Kjetil Telle, 2012. "Cash-on-Hand and the Duration of Job Search," KOF Working papers 12-299, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:12-299
    DOI: 10.3929/ethz-a-006999252
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    Citations

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    Cited by:

    1. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    2. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    3. Juliana MESÉN VARGAS & Bruno VAN DER LINDEN, 2017. "Is there always a trade-off between insurance and incentives? The case of unemployment with subsistence constraints," LIDAM Discussion Papers IRES 2017014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Martin Gonzalez-Rozada & Hernan Ruffo, 2014. "The Effects of Unemployment Insurance Under High Informality: Evidence from Argentina," Department of Economics Working Papers wp201403, Universidad Torcuato Di Tella.
    5. Arna Vardardottir & Michaela Pagel, 2016. "The Liquid Hand-to-Mouth: Evidence from a Personal Finance Management Software," 2016 Meeting Papers 789, Society for Economic Dynamics.
    6. Martin Gonzalez-Rozada & Hernan Ruffo, 2014. "The Effects of Unemployment Insurance Under High Informality: Evidence from Argentina," Department of Economics Working Papers 2014_3, Universidad Torcuato Di Tella.
    7. Basten, Christoph & Koch, Catherine, 2015. "The causal effect of house prices on mortgage demand and mortgage supply: Evidence from Switzerland," Journal of Housing Economics, Elsevier, vol. 30(C), pages 1-22.

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