TY  - RPRT
        AU  - Pissarides, Christopher A.
        TI  - Consumption and Savings with Unemployment Risk: Implications for Optimal Employment Contracts
        PY  - 2004/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1183
        UR  - https://www.iza.org/index.php/publications/dp1183
        AB  - 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.
        KW  - employment risk
KW  - unemployment risk
KW  - severance compensation
KW  - notice of dismissal
        ER  -