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Training and search during unemployment

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  • Spinnewijn, Johannes

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.

Suggested Citation

  • Spinnewijn, Johannes, 2013. "Training and search during unemployment," Journal of Public Economics, Elsevier, vol. 99(C), pages 49-65.
  • Handle: RePEc:eee:pubeco:v:99:y:2013:i:c:p:49-65
    DOI: 10.1016/j.jpubeco.2013.01.002
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    References listed on IDEAS

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    Cited by:

    1. Lukas Inderbitzin & Stefan Staubli & Josef Zweimüller, 2016. "Extended Unemployment Benefits and Early Retirement: Program Complementarity and Program Substitution," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 253-288, February.
    2. Nicola Pavoni & Ofer Setty & Giovanni Violante, 2016. "The design of 'soft' welfare-to-work programs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 160-180, April.
    3. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2013. "The Causal Effect of Unemployment Duration on Wages: Evidence from Unemployment Insurance Extensions," NBER Working Papers 19772, National Bureau of Economic Research, Inc.
    4. Aderonke Osikominu, 2016. "The dynamics of training programs for the unemployed," IZA World of Labor, Institute for the Study of Labor (IZA), pages 277-277, July.

    More about this item

    Keywords

    Unemployment; Optimal insurance; Human capital; Training;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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