Talent discovery, layoff risk and unemployment insurance

Arbeitspapier

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.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 603

Classification and Topics

• Classification: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Education and Research Institutions: General ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Labor Turnover; Vacancies; Layoffs ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: talent ; learning ; layoff risk ; unemployment insurance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pagano, Marco ; Picariello, Luca
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/183611
• URN: urn:nbn:de:hebis:30:3-473902