Staying on the Dole
AbstractWe develop a simple model of labor market participation, human capital degradation, and re-training. We focus on how non-participation, as a distinct state from unemployment and employment, is determined by the welfare system in interaction with labor market conditions and personal characteristics. We provide a tractable framework to analyze how the decisions to exit the labor force and to mitigate human capital degradation by re-training depend on a broad range of factors such as education, skill degradation, age, labor market shocks, labor taxes, unemployment insurance benefits and social assistance. We extend our framework by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-377.
Length: 30 pages
Date of creation: Oct 2007
Date of revision:
Unemployment; Non-Participation; Skill Degradation; Re-training; Unemployment Benefits; Social Assistance; Present-Biased Preferences.;
Other versions of this item:
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-HRM-2007-11-03 (Human Capital & Human Resource Management)
- NEP-IAS-2007-11-03 (Insurance Economics)
- NEP-LAB-2007-11-03 (Labour Economics)
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