Saving for Retirement with Job Loss Risk
Abstract: This article studies a tractable theoretical model of optimal consumption and saving decisions with endogenous retirement. Particular attention is paid to the impact of an increase in the risk of losing one?s job on the optimal path of consumption and wealth accumulation. Even if one does not actually lose their job, an increase in the risk of a job loss is by itself sufficient to cause lower consumption, higher saving, and, through faster retirement, lower labor supply.
JEL Classification: J26;
File format is application/pdf
Description: Full text
Provider: Federal Reserve Bank of Richmond
Part of Series: Economic Quarterly
Publication Date: 2013