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The Welfare Effects of Involuntary Part-time Work

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  • Daniel Borowcyzk-Martins
  • Etienne Lalé

Abstract

Employed individuals in the U.S. are increasingly more likely to work part-time involuntarily than to be unemployed. Spells of involuntary part-time work are different from unemployment spells: a full-time worker who takes on a part-time job suffers an earnings loss while remaining employed, and is unlikely to receive income compensation from publicly provided insurance programs. We analyze these differences through the lens of an incomplete-market, job-search model featuring unemployment risk alongside an additional risk of involuntary part-time employment. A calibration of the model consistent with U.S. institutions and labour market dynamics shows that involuntary part-time work generates lower welfare losses relative to unemployment. This finding relies critically on the much higher probability to return to full-time employment from part-time work. We interpret it as a premium in access to full-time work faced by involuntary part-time workers, and use our model to tabulate its value in consumption-equivalent units.

Suggested Citation

  • Daniel Borowcyzk-Martins & Etienne Lalé, 2016. "The Welfare Effects of Involuntary Part-time Work," Bristol Economics Discussion Papers 16/673, Department of Economics, University of Bristol, UK, revised 12 Dec 2016.
  • Handle: RePEc:bri:uobdis:16/673
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    References listed on IDEAS

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    More about this item

    Keywords

    Involuntary part-time work; Unemployment; Welfare;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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