published in: Journal of Risk and Insurance, 2019, 86 (2), 351 - 380
Job displacement in the U.S. is a serious threat to the earnings of long-tenured workers, through both (i) unemployment spells and (ii) reduced reemployment wages. Although full insurance requires both unemployment benefits and wage insurance, supply difficulties limit actual-loss insurance, and separation packages typically include partial unemployment insurance and scheduled (fixed sum) severance pay. The design of this two dimensional package requires a systems approach as well as a generalized replacement ratio measure of adequacy).
Job search moral hazard and layoff moral hazard (firing costs), individually and in combination, introduce potentially serious contracting concerns. Economic theory provides a practical guide to the integration of these insurance instruments in this complex planning environment. One important implication: given the structure of earnings losses at displacement in the U.S., severance pay should increase with length of service in the firm ("tenure"), which is common, and unemployment insurance benefit levels should fall, which is not.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.