Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Talent Discovery, Layoff Risk and Unemployment Insurance.
() and Luca Picariello
Abstract: In talent-intensive jobs, workers’ performance reveals
their quality. This enhances productivity and wages, but also increases
layoff risk. If workers cannot resign from their jobs, firms can insure
them via severance pay. If instead workers can resign, private insurance
cannot be provided, and more risk-averse workers will choose less
informative jobs. This lowers expected Productivity and wages. Public
unemployment insurance corrects this inefficiency, enhancing employment in
talent-sensitive industries and investment in education by employees. The
prediction that the generosity of unemployment insurance is positively
correlated with the share of workers in talent-sensitive industries is
consistent with international and U.S. evidence.
Keywords: Talent; Learning; layoff risk; unemployment insurance; (follow links to similar papers)
JEL-Codes: D61; D62; D83; I26; J24; J65; (follow links to similar papers)
39 pages, August 1, 2017
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