Job Finding, Job Loss and Consumption Behaviour

E. Koç

Research output: Working paperDiscussion paperOther research output

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Abstract

According to the permanent income / life-cycle hypothesis (PILCH), under standard preferences anticipated changes in employment status should not affect the changes in consumption. In this paper, we investigate the consumption behaviour of individuals who lose their jobs and those who find a job. For a representative sample of American households anticipated changes between employment and unemployment states are identified using monthly transition expectations. Firstly, it is shown that expectations have significant predictive power conditional on individual characteristics and a set of time-varying controls. This allows us to use a two-stage estimation strategy, where expectations are used to explain anticipated changes in employment status
in the first stage and changes in consumption are regressed on anticipated changes in employment status in the second stage. Secondly, by estimating a first-order approximation of the Euler equation, it is shown that consumption expenditures are not sensitive to either anticipated transition into unemployment or anticipated transition into employment which is in line with the PILCH.
Original languageEnglish
Place of PublicationTilburg
PublisherDepartment of Economics
Number of pages36
Volume2015-015
Publication statusPublished - 3 Mar 2015

Publication series

NameCentER Discussion Paper
Volume2015-015

Fingerprint

Consumption behavior
Job loss
Unemployment
Life cycle hypothesis
Employment status
Permanent income
Individual characteristics
Two-stage estimation
Approximation
Predictive power
Time-varying
Household
Employment change
Expenditure
Euler equations

Keywords

  • life-cycle model
  • labour market
  • expectations

Cite this

Koç, E. (2015). Job Finding, Job Loss and Consumption Behaviour. (CentER Discussion Paper; Vol. 2015-015). Tilburg: Department of Economics.
Koç, E. / Job Finding, Job Loss and Consumption Behaviour. Tilburg : Department of Economics, 2015. (CentER Discussion Paper).
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Koç, E 2015 'Job Finding, Job Loss and Consumption Behaviour' CentER Discussion Paper, vol. 2015-015, Department of Economics, Tilburg.

Job Finding, Job Loss and Consumption Behaviour. / Koç, E.

Tilburg : Department of Economics, 2015. (CentER Discussion Paper; Vol. 2015-015).

Research output: Working paperDiscussion paperOther research output

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Koç E. Job Finding, Job Loss and Consumption Behaviour. Tilburg: Department of Economics. 2015 Mar 3. (CentER Discussion Paper).