Discussion Paper Details

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Title: Staying on the Dole

Author(s): Holger Strulik, Jean-Robert Tyran and Paolo Vanin

Publication Date: November 2006

Keyword(s): present-biased preferences, retraining, skill degradation, unemployment, unemployment benefits and welfare assistance

Programme Area(s): Labour Economics and Public Economics

Abstract: We develop a simple model of short- and long-term unemployment to study how labour market institutions interact with labour market conditions and personal characteristics of the unemployed. We analyze how the decision to exit unemployment and to mitigate human capital degradation by retraining depends on education, skill degradation, age, labour market tightness, taxes, unemployment insurance benefits and welfare assistance. We extend our analysis by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap.

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Bibliographic Reference

Strulik, H, Tyran, J and Vanin, P. 2006. 'Staying on the Dole'. London, Centre for Economic Policy Research.