Career length: Effects of curvature of earnings profiles, earnings shocks, taxes, and social security

Lars Ljungqvist, Thomas J. Sargent

    Research output: Contribution to journalArticle

    Abstract

    The same high labor supply elasticity that characterizes a representative family model with indivisible labor and employment lotteries also emerges without lotteries when self-insuring individuals choose interior solutions for their career lengths. Off corners, the more elastic is an earnings profile to accumulated working time, the longer is a worker's career. Negative (positive) unanticipated earnings shocks reduce (increase) the career length of a worker holding positive assets, while the effects are the opposite for a worker with negative assets. By inducing a worker to retire at an official retirement age, government provided social security can attenuate responses of career lengths to earnings profile slopes, earnings shocks, and taxes.

    Original languageEnglish (US)
    Pages (from-to)1-20
    Number of pages20
    JournalReview of Economic Dynamics
    Volume17
    Issue number1
    DOIs
    StatePublished - Jan 1 2014

      Fingerprint

    Keywords

    • Career length
    • Earnings profile
    • Earnings shocks
    • Indivisible labor
    • Labor supply elasticity
    • Social security
    • Taxes

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this