Working Paper: CEPR ID: DP18577
Authors: Ana Figueiredo; Olivier Marie; Agnieszka Markiewicz
Abstract: We study changes in job security after displacement and exploit eligibility rules for lump-sum payments in the Netherlands to investigate the role of liquid wealth. Within five years of job loss, the likelihood of being a permanent worker remains 12% lower for displaced workers. Those eligible to a lump-sum transfer experience a significantly smaller negative shock to job security. This effect is driven by workers with low liquid wealth, pointing to liquidity constraints as an important mechanism linking unemployment and job security. Finally, we estimate that losses in job security can explain 21% of the wage cost associated with job displacement.
Keywords: job loss; liquid and illiquid wealth; job security; severance pay; the Netherlands
JEL Codes: D31; E24; J31; J63; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| liquidity constraints (E41) | job security (J28) |
| job displacement (J63) | job security (J28) |
| lumpsum transfer eligibility (F16) | job security (J28) |
| job displacement (J63) | wage cost (J31) |