The Wealth of the Unemployed: Adequacy and Implications for Unemployment Insurance / Jonathan Gruber.

Format:

Book

Author/Creator:

Gruber, Jonathan.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7348.

NBER working paper series no. w7348

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Wealth of the Unemployed

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

While there has been considerable discussion of the adequacy of unemployment insurance (UI) benefits as a form of income replacement, there is little evidence on the other resources that the unemployed have to finance their unemployment spells. In this paper I focus on focus on one form of resources, own wealth holdings. I find that the median worker has financial assets sufficient to finance roughly two-thirds of the income loss from an unemployment spell, but that there is tremendous heterogeneity in wealth holdings; almost one-third of workers can't even replace 10% of their income loss. Most strikingly, ex-ante wealth holdings decline precipitously with realized unemployment durations, both absolutely and (especially) relative to ex-post income loss, suggesting that adequacy could be increased if UI benefits were targeted to those with longer spells. I also find strong evidence that individuals who are eligible for more generous UI draw down their wealth more slowly during unemployment spells. This demonstrates that wealth is used as a consumption smoothing device alongside UI to cope with the income loss from unemployment.

Notes:

Print version record

September 1999.