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Staying on the Dole

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  • Holger Strulik

    (University of Hannover)

  • Jean-Robert Tyran

    (Department of Economics, University of Copenhagen)

  • Paolo Vanini

    (University of Zurich)

Abstract

We develop a simple model of short- and long-term unemployment to study how labor market institutions interact with labor market conditions and personal characteristics of the unemployed. We analyze how the decision to exit unemployment and to mitigate human capital degradation by retraining depends on education, skill degradation, age, labor market tightness, taxes, unemployment insurance benefits and welfare assistance. We extend our analysis by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap.

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File URL: http://www.econ.ku.dk/english/research/publications/wp/2006/0618.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 06-18.

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Length: 22 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:kud:kuiedp:0618

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Keywords: unemployment; skill degradation; retraining; unemployment benefits; welfare assistance; present-biased preferences;

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References

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  23. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 37-54, Summer.
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  25. Coles, Melvyn & Masters, Adrian, 2000. "Retraining and long-term unemployment in a model of unlearning by not doing," European Economic Review, Elsevier, Elsevier, vol. 44(9), pages 1801-1822, October.
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