What mental models do individuals use to approximate their tax schedule? Using an incentivized income-tax forecasting task, we estimate the prevalence of the "schmeduling" heuristics for constructing mental representations of nonlinear incentive schemes. We find evidence of widespread adoption...

One of the most sizable and least predictable shocks to economic opportunities in developing countries is major illness, both in terms of medical care expenditures and lost income from reduced labor supply and productivity. As a result, families may not be able to smooth their consumption over...

This paper uses the Panel Study of Income Dynamics to provide some of the first direct evidence that wealth is systematically higher for consumers with greater income uncertainty. However, the apparent pattern of precautionary saving is not consistent with a standard parameterization of the life...

An employee's annual earnings fall by 10% the year her firm files for bankruptcy and fall by a cumulative present value of 67% over seven years. This effect is more pronounced in thin labor markets and among small firms that are ultimately liquidated. Compensating wage differentials for this...

We show that a calibrated life-cycle two-earner household model with endogenous labor supply can rationalize the extent of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri and Saporta-Eksten (2016) in U.S. data. With additively...

Three main findings emerge from the empirical work. First, five years after job loss, the earnings of these displaced workers were 16 percent less than those of comparison groups of non-displaced workers. Second, earnings losses within a year of displacement can be explained almost entirely by...

Prior literature has established that displaced workers suffer persistent earnings losses by following workers in administrative data after mass layoffs. This literature assumes that these are involuntary separations owing to economic distress. This paper examines this assumption by matching...

This paper uses variation induced by firm closures to explore the intergenerational effects of worker displacement. Using a Canadian panel of administrative data that follows almost 60,000 father-child pairs from 1978 to 1999 and includes detailed information about the firms at which the father...

Unexpected health events such as a heart attack or new cancer diagnosis are very common for workers in their 50s and 60s. These health shocks can result in a significant loss in family income if the worker reduces labor supply, but the family can also protect itself against this loss if the...

We study the evolution of individual labor earnings over the life cycle using a large panel data set of earnings histories drawn from U.S. administrative records. Using fully nonparametric methods, our analysis reaches two broad conclusions. First, earnings shocks display substantial deviations...