Flexicurity and Job Reallocation
AbstractThis paper develops a general equilibrium model with safe and risky jobs where unemployment is concentrated in a highly productive but volatile sector. Frictional unemployment arises in the process of job creation, firing and retraining for alternative employment. The paper derives an optimal welfare policy which combines the design of the tax schedule with three pillars of the `flexicurity' model. The optimal policy is characterized by (i) a progressive wage tax schedule; (ii) a wage subsidy to re-employed workers; (iii) unemployment insurance benefits; (iv) job protection to contain firing; and (v) active labor market policy to facilitate labor reallocation.
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Bibliographic InfoPaper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2010 with number 2010-11.
Length: 42 pages
Date of creation: Apr 2010
Date of revision:
Flexicurity; insurance; job protection; active labor market policy;
Find related papers by JEL classification:
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-IAS-2010-04-24 (Insurance Economics)
- NEP-LAB-2010-04-24 (Labour Economics)
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