Unemployment benefits and educational choices
In this paper it is argued that the risk-pooling role of unemployment beneÞts affects the irreversible choices of future labour market entrants. One such ex ante choice is education. Some types of education lead to general human capital that lead to almost certain employment. Other types of education are more specialised and lead to less secure employment. We address this issue in OLG search models that allow for risk-aversion, heterogeneity in talents, endogenous price formation of different specialisations, and competitive wage formation. We Þnd that in the absence of unemployment beneÞts, the percentage of individuals taking high-risk specialised education is ineffeciently low. Those with higher innate abilities are typically found to take lower degrees of specialisation, implying that the relation between wages and risks at the individual level is the reverse from what it is at the aggregate level. We Þnd that an unemployment beneÞt (UB) system raises efficiency and welfare because it promotes efficient specialisation. Because education takes time, it takes a long time before the composition of the workforce has adapted to changing incentives. With a calibrated model we explore such lags between unexpected changes in circumstances and outcomes.
|Date of creation:||15 Jun 2001|
|Contact details of provider:|| Postal: GPO Box 2434, BRISBANE QLD 4001|
Web page: http://www.bus.qut.edu.au/faculty/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Robert Shimer, 1999.
"Efficient Unemployment Insurance,"
Journal of Political Economy,
University of Chicago Press, vol. 107(5), pages 893-928, October.
- Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
- Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
- Aumann, Robert J., 1977. "The St. Petersburg paradox: A discussion of some recent comments," Journal of Economic Theory, Elsevier, vol. 14(2), pages 443-445, April.
- Acemoglu, Daron & Shimer, Robert, 2000.
"Productivity gains from unemployment insurance,"
European Economic Review,
Elsevier, vol. 44(7), pages 1195-1224, June.
- Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," NBER Working Papers 7352, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," Working papers 99-29, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Blanchard & Justin Wolfers, 1999.
"The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence,"
NBER Working Papers
7282, National Bureau of Economic Research, Inc.
- Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
- Christophe Daniel & Catherine Sofer, 1998.
"Bargaining, Compensating Wage Differentials, and Dualism of the Labor Market: Theory and Evidence for France,"
- Daniel, Christophe & Sofer, Catherine, 1998. "Bargaining, Compensating Wage Differentials, and Dualism of the Labor Market: Theory and Evidence for France," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 546-575, July.
- Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 333-343, July.
- Liliane Bonnal & Denis Fougère & Anne Sérandon, 1997. "Evaluating the Impact of French Employment Policies on Individual Labour Market Histories," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 683-713.
When requesting a correction, please mention this item's handle: RePEc:qut:pfrijt:2001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (School of Economics)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.