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Staying on the Dole

Holger Strulik (), Jean-Robert Tyran () and Paolo Vanini

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

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.

Keywords: Unemployment; Non-Participation; Skill Degradation; Re-training; Unemployment Benefits; Social Assistance; Present-Biased Preferences. (search for similar items in EconPapers)
JEL-codes: J64 J31 J38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hrm, nep-ias and nep-lab
Date: 2007-10
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Working Paper: Staying on the Dole (2006) Downloads
Working Paper: Staying on the Dole (2006) Downloads
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