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Social Insurance and Occupational Mobility

Author

Listed:
  • German Cubas

    () (Department of Economics, University of Houston)

  • Pedro Silos

    () (Department of Economics, Temple University)

Abstract

This paper studies how insurance from progressive taxation improves the matching of workers to occupations. We propose an equilibrium dynamic assignment model to illustrate how social insurance encourages mobility. Workers experiment to find their best occupational fit in a process filled with uncertainty. Risk aversion and limited earnings insurance induce workers to remain in unfitting occupations. We estimate the model using microdata from the United States and Germany. Higher earnings uncertainty explains the U.S. higher mobility rate. When workers in the United States enjoy Germany's higher progressivity, mobility rises. Output and welfare gains are large.

Suggested Citation

  • German Cubas & Pedro Silos, 2018. "Social Insurance and Occupational Mobility," DETU Working Papers 1802, Department of Economics, Temple University.
  • Handle: RePEc:tem:wpaper:1802
    as

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    File URL: http://www.cla.temple.edu/RePEc/documents/DETU_18_02.pdf
    File Function: First version, 2018
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    References listed on IDEAS

    as
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Two papers on unemployment insurance and misallocation
      by Christian Zimmermann in NEP-DGE blog on 2018-03-05 09:53:24

    More about this item

    Keywords

    Progressive Taxation; Social Insurance; Occupational Choice;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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