Career Length:Effects of Curvature of Earnings Profiles, Earnings Shocks, Taxes, and Social Security

Lars Ljungqvist (Stockholm School of Business)

June 6, 2011, 17:00–18:30


Room Amphi S

Political Economy Seminar


The same high labor supply elasticity that characterizes a representative family model with indivisible labor and employment lotteries can also emerge without lotteries when self-insuring individuals choose career lengths. Off corners, the more elastic the earnings profile is 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 at the time of the shock, 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.