Job Loss Expectations, Durable Consumption and Household Finances: Evidence from Linked Survey Data

Abstract

Job security is important for durable consumption and household savings. Using surveys, workers express a probability that they will lose their job in the next 12 months. In order to assess the empirical content of these probabilities, we link survey data to administrative data with labor market outcomes. Workers predict job loss quite well, in particular those whose job loss is followed by unemployment. Workers with higher job loss expectations acquire cheaper cars, and are less likely to buy new cars. In line with models of precautionary saving, higher job loss expectations are associated with more savings and less exposure to risky assets.

Keywords: Subjective expectations; Durable consumption; Household saving

JEL Classification: C81, C83, D14, J63