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The Welfare Effects of Involuntary Part-time Work

Listed author(s):
  • Daniel Borowcyzk-Martins
  • Etienne Lalé

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.

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File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp16673.pdf
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Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 16/673.

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Length: 37 pages.
Date of creation: 13 Apr 2016
Date of revision: 12 Dec 2016
Handle: RePEc:bri:uobdis:16/673
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