TY  - JOUR
AU  - Gruber,Jonathan
TI  - The Wealth of the Unemployed:  Adequacy and Implications for Unemployment Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7348
PY  - 1999
Y2  - September 1999
UR  - http://www.nber.org/papers/w7348
L1  - http://www.nber.org/papers/w7348.pdf
N1  - Author contact info:
Jonathan Gruber
MIT Department of Economics
E52-355
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/253-8892
Fax: 617/253-1330
E-Mail: gruberj@mit.edu
AB  - While there has been considerable discussion of the adequacy of unemployment insurance (UI) benefits as a form of income replacement, there is little evidence on the other resources that the unemployed have to finance their unemployment spells.  In this paper I focus on focus on one form of resources, own wealth holdings. I find that the median worker has financial assets sufficient to finance roughly two-thirds of the income loss from an unemployment spell, but that there is tremendous heterogeneity in wealth holdings; almost one-third of workers can't even replace 10% of their income loss.  Most strikingly, ex-ante wealth holdings decline precipitously with realized unemployment durations, both absolutely and (especially) relative to ex-post income loss, suggesting that adequacy could be increased if UI benefits were targeted to those with longer spells.  I also find strong evidence that individuals who are eligible for more generous UI draw down their wealth more slowly during unemployment spells.  This demonstrates that wealth is used as a consumption smoothing device alongside UI to cope with the income loss from unemployment.
ER  -