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Talent discovery, layoff risk and unemployment insurance

Marco Pagano and Luca Picariello

No 603, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: In talent-intensive jobs, workers' quality is revealed by their performance. This enhances productivity and earnings, but also increases layoff risk. Firms cannot insure workers against this risk if they compete fiercely for talent. In this case, the more risk-averse workers will choose less quality-revealing jobs. This lowers expected productivity and salaries. Public unemployment insurance corrects this inefficiency, enhancing employment in talent-sensitive industries, consistently with international evidence. Unemployment insurance dominates legal restrictions on firms' dismissals, which penalize more talent-sensitive firms and thus depress expected productivity. Finally, unemployment insurance fosters education, by encouraging investment in risky human capital that enhances talent discovery.

Keywords: talent; learning; layoff risk; unemployment insurance (search for similar items in EconPapers)
JEL-codes: D61 D83 I20 J24 J63 J65 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-hrm, nep-ias and nep-lab
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https://www.econstor.eu/bitstream/10419/183611/1/1037632052.pdf (application/pdf)

Related works:
Journal Article: Talent discovery, layoff risk and unemployment insurance (2023) Downloads
Working Paper: Talent Discovery, Layoff Risk and Unemployment Insurance (2023) Downloads
Working Paper: Talent Discovery, Layoff Risk and Unemployment Insurance (2018) Downloads
Working Paper: Talent Discovery, Layoff Risk and Unemployment Insurance (2017) Downloads
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