Unemployment Insurance, Wage Dynamics and Inequality over the Life Cycle

Paul Bingley (), Lorenzo Cappellari and Niels C. Westergård-Nielsen ()
Additional contact information
Paul Bingley: VIVE - The Danish Centre for Applied Social Science
Niels C. Westergård-Nielsen: Copenhagen Business School

No 7128, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate the relationship between life cycle wages and individual membership of unemployment insurance schemes in Denmark. We separate permanent from transitory wages and characterise them using membership of unemployment insurance funds. We find that unemployment insurance is associated with lower wage growth heterogeneity over the life cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance, robustness checks suggest that moral hazard is the relevant interpretation.

Keywords: wage dynamics; wage inequality; wage instability; unemployment insurance (search for similar items in EconPapers)
JEL-codes: J31 J65 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2013-01
New Economics Papers: this item is included in nep-ias, nep-lab, nep-lma, nep-ltv and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published - published in: Economic Journal, 2013, 123 (568), 341–372

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Journal Article: Unemployment Insurance, Wage Dynamics and Inequality Over the Life Cycle (2013)
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