Subjective Earning Risk

Department of Economics and Decision Sciences

Speaker:  Søren Leth-Petersen (Copenhaguen)

Room T-014

Abstract :

We introduce a survey instrument to measure earnings risk allowing for the possibility of quitting or being fired from the current job. We find these transitions to be the key drivers of subjective risk. A link with administrative data provides multiple credibility checks and reveals that subjective earnings risk varies systematically across the population. It is also many times smaller than traditional estimates even when conditioning richly on demographics and job history. We show that subjective earnings risk can help explain why many hold limited liquid assets.

Joint work with: Victoria Gregory & Eungik Lee