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Staying on the Dole

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  • Strulik, Holger
  • Tyran, Jean-Robert
  • Vanini, Paolo

Abstract

We 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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File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-377.pdf
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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-377.

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Length: 30 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:han:dpaper:dp-377

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Keywords: Unemployment; Non-Participation; Skill Degradation; Re-training; Unemployment Benefits; Social Assistance; Present-Biased Preferences.;

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