Saving and Portfolio Allocation Before and after Job Loss

KOF Swiss Economic Institute Working Paper No. 298

50 Pages Posted: 24 Feb 2012

See all articles by Christoph Basten

Christoph Basten

University of Zurich; Swiss Finance Institute; CESifo (Center for Economic Studies and Ifo Institute)

Andreas Fagereng

BI Norwegian Business School; Statistics Norway

Kjetil Telle

Statistics Norway - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: February 13, 2012

Abstract

Using administrative panel data from Norway, we investigate the development of household labor income, financial 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.

Keywords: unemployment, precautionary saving, consumption smoothing, household portfolios, portfolio allocation, optimal unemployment insurance

JEL Classification: D12, E21, E24, G11, J65

Suggested Citation

Basten, Christoph and Fagereng, Andreas and Telle, Kjetil, Saving and Portfolio Allocation Before and after Job Loss (February 13, 2012). KOF Swiss Economic Institute Working Paper No. 298, Available at SSRN: https://ssrn.com/abstract=2010052 or http://dx.doi.org/10.2139/ssrn.2010052

Christoph Basten (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute

c/o University of Geneva
40 Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Fagereng

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Statistics Norway ( email )

Postboks 8131 Dep, 0033 Oslo
Oslo, Oslo 0033
Norway
+47 2109 4700 (Phone)

HOME PAGE: http://sites.google.com/site/andreasfagereng/

Kjetil Telle

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway

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