Entrepreneurship and Labor Market Mobility: the Role of Unemployment Insurance

Alexandre Gaillard and Sumudu Kankanamge

No 21-1187, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We evaluate the effects of unemployment insurance variations in a general equilibrium occupational choice model of entrepreneurship. We establish that the occupational flow from unemployment to entrepreneurship is remarkably sensitive to unemployment insurance generosity, corroborating our empirical findings. Beyond direct effects on unemployment, we find large reallocations between employment and entrepreneurship relative to changes in generosity. They contribute to an empirically consistent stable aggregate employment rate, despite increasing unemployment. We show that an insurance coverage effect, i.e. a change in the relative riskiness between occupations with respect to generosity, is a key driver of our results.

Keywords: Entrepreneurship; Unemployment Insurance; Labor Market Mobility (search for similar items in EconPapers)
JEL-codes: E24 E61 J65 (search for similar items in EconPapers)
Date: 2021-02-08
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-ent, nep-ias, nep-lab and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:125253

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