| Original language | English |
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| Number of pages | 40 |
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| Journal | International Economic Review |
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| Early online date | 4 Jun 2018 |
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| DOIs | |
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| Date | Accepted/In press - 19 Dec 2017 |
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| Date | E-pub ahead of print (current) - 4 Jun 2018 |
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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.
