Training and search during unemployment

Johannes Spinnewijn

Journal of Public Economics, 2013, vol. 99, issue C, 49-65

Abstract: Displaced workers often experience large losses in earnings even a long time after reemployment. Training programs during unemployment mitigate these losses but also affect the unemployed's willingness to search. This paper analyzes how mandatory training programs affect the optimal design of unemployment insurance and how the training intensity should evolve during the unemployment spell. The introduction of training reverses the optimal consumption dynamics during the unemployment spell and makes it optimal to incentivize the long-term unemployed to find employment despite the depreciation of their human capital. Targeting training programs towards the long-term unemployed, however, is optimal only if the fall in human capital upon displacement is small relative to the depreciation during unemployment.

Keywords: Unemployment; Optimal insurance; Human capital; Training (search for similar items in EconPapers)
JEL-codes: H21 J62 J64 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Training and Search during Unemployment (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:99:y:2013:i:c:p:49-65

DOI: 10.1016/j.jpubeco.2013.01.002

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