Abstract
This article studies a competitive search model of the labor market with learning about match‐specific productivity in which risk‐averse workers factor present and future unemployment risks in their search decisions. We examine internally efficient equilibrium allocations in which match termination occurs only if the joint value of a worker–firm pair is negative. Internal efficiency poses a trade‐off between present and future risks. Public insurance provision also affects this trade‐off and, hence, worker turnover and job composition. In addition to unemployment benefits, the implementation of the planner's allocation requires a negative income tax and a 0 layoff tax.
Original language | English |
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Pages (from-to) | 1837-1876 |
Number of pages | 40 |
Journal | International Economic Review |
Volume | 59 |
Issue number | 4 |
Early online date | 4 Jun 2018 |
DOIs | |
Publication status | Published - Nov 2018 |
Research Groups and Themes
- ECON Macroeconomics
- ECON CEPS Welfare