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Unemployment Insurance, Wage Dynamics and Inequality Over the Life Cycle

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  • Paul Bingley
  • Lorenzo Cappellari
  • Niels Westergård‐Nielsen

Abstract

We investigate the relationship between life cycle wages and individual membership of unemployment insurance schemes in Denmark. We separate permanent from transitory wages and characterise them using membership of unemployment insurance funds. We find that unemployment insurance is associated with lower wage growth heterogeneity over the life cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance, robustness checks suggest that moral hazard is the relevant interpretation.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): (2013)
Issue (Month): (05)
Pages: 341-372

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Handle: RePEc:ecj:econjl:v::y:2013:i::p:341-372

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Citations

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Cited by:
  1. Lorenzo Cappellari & Marco Leonardi, 2013. "Earnings Instability and Tenure," CESifo Working Paper Series 4145, CESifo Group Munich.
  2. Paul Bingley & Lorenzo Cappellari, 2012. "Alike in Many Ways: Intergenerational and Sibling Correlations of Brothers' Earnings," CESifo Working Paper Series 3994, CESifo Group Munich.
  3. Paul Bingley & Lorenzo Cappellari, 2013. "Correlation of Brothers Earnings and Intergenerational Transmission," DISCE - Working Papers del Dipartimento di Economia e Finanza def6, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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