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Training and search during unemployment

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  • Spinnewijn, Johannes
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    Abstract

    Displaced workers often experience large losses in earnings even a long time after reemployment. Training programs during unemployment mitigate these losses but also affect the unemployed's willingness to search. This paper analyzes how mandatory training programs affect the optimal design of unemployment insurance and how the training intensity should evolve during the unemployment spell. The introduction of training reverses the optimal consumption dynamics during the unemployment spell and makes it optimal to incentivize the long-term unemployed to find employment despite the depreciation of their human capital. Targeting training programs towards the long-term unemployed, however, is optimal only if the fall in human capital upon displacement is small relative to the depreciation during unemployment.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0047272713000157
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 99 (2013)
    Issue (Month): C ()
    Pages: 49-65

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    Handle: RePEc:eee:pubeco:v:99:y:2013:i:c:p:49-65

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Unemployment; Optimal insurance; Human capital; Training;

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    Cited by:
    1. Inderbitzin, Lukas & Staubli, Stefan & Zweimüller, Josef, 2013. "Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution," IZA Discussion Papers 7330, Institute for the Study of Labor (IZA).

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