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http://hdl.handle.net/10419/20423
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| Title: | | Consumption and Savings with Unemployment Risk : Implications for Optimal Employment Contracts  |
| Authors: | | Pissarides, Christopher A. |
| Issue Date: | | 2004 |
| Series/Report no.: | | IZA Discussion paper series 1183 |
| Abstract: | | This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation and sometimes give notice before dismissal. Severance compensation smoothes consumption during employment but dismissal delays insure partially against the unemployment risk because of moral hazard. During the delay consumption falls to give incentives to the worker to search for another job. No dismissal delays are optimal if exogenous unemployment compensation is sufficiently generous. |
| Subjects: | | employment risk unemployment risk severance compensation notice of dismissal |
| JEL: | | E24 J32 J33 E21 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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