Abstract This paper studies the savings behavior of workers faced with costly job loss. Using Danish administrative data on income, savings, and employment from 1983 to 2010, I find cumulative earnings losses of more than $20,000 five years after a layoff. Income losses are smaller, around 13 percent of pre-layoff income, and there is no evidence of an expenditure loss. Under a number of specifications, the data reveal higher savings in the years before a mass layoff among displaced workers than those in the same firm who keep their job, consistent with worker foresight about the idiosyncratic probability of losing their job. JEL Classification: J63, D91, E2
