Paper #1931

Título:

Self-insurance in turbulent labor markets

Autores:

Isaac Baley, Ana Figueiredo, Cristiano Mantovani y Alireza Sepahsalari

Fecha:

Diciembre 2025

Resumen:

We study how wealth shapes workers’ outcomes in turbulent labor markets, where job displacement exposes workers to the risk of skill loss. We develop and quantify a heterogeneousagent directed search model with incomplete markets, skill dynamics, and job “tiers” with distinct risk–return profiles. Workers self-insure against separation and turbulence risks through savings and search decisions, both within and across tiers, generating post-separation outcomes that vary sharply with wealth. In U.S. data, poor workers face the most significant and most persistent wage losses, driven by wealth-induced downgrades into low-tier jobs. Policy experiments reveal clear trade-offs: unemployment insurance improves welfare, while job-creation subsidies more effectively expand output.

Palabras clave:

turbulence riks; job displacement; self-insurance; precautionary savings; precautionary search; directed search; skill loss; job tiers; unemployment insurance; job-creation subsidies.

Códigos JEL:

D31, E21, E24, J24, J31, J63, J64

Área de investigación:

Macroeconomía y Economía Internacional

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