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Staying on the Dole

Author

Listed:
  • Strulik, Holger
  • Tyran, Jean-Robert
  • Vanini, Paolo

Abstract

We develop a simple model of labor market participation, human capital degradation, and re-training. We focus on how non-participation, as a distinct state from unemployment and employment, is determined by the welfare system in interaction with labor market conditions and personal characteristics. We provide a tractable framework to analyze how the decisions to exit the labor force and to mitigate human capital degradation by re-training depend on a broad range of factors such as education, skill degradation, age, labor market shocks, labor taxes, unemployment insurance benefits and social assistance. We extend our framework by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap.

Suggested Citation

  • Strulik, Holger & Tyran, Jean-Robert & Vanini, Paolo, 2007. "Staying on the Dole," Hannover Economic Papers (HEP) dp-377, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-377
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    File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-377.pdf
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    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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