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SOCIAL INSURANCE AND OCCUPATIONAL MOBILITY

German Cubas () and Pedro Silos ()

International Economic Review, 2020, vol. 61, issue 1, 219-240

Abstract: This article 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.

Date: 2020
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https://doi.org/10.1111/iere.12422

Related works:
Working Paper: Social Insurance and Occupational Mobility (2018) Downloads
Working Paper: Social Insurance and Occupational Mobility (2017) Downloads
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International Economic Review is currently edited by Michael O'Riordan and Dirk Krueger

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