Download This PaperTalent Discovery, Layoff Risk and Unemployment Insurance
62 Pages Posted: 2 Aug 2017 Last revised: 16 Feb 2023
There are 2 versions of this paper
Talent Discovery, Layoff Risk and Unemployment Insurance
Talent Discovery, Layoff Risk and Unemployment Insurance
Date Written: April 14, 2020
Abstract
In talent-intensive jobs, workers' quality is revealed by their performance. This enhances productivity and earnings, but also increases layoff risk. We show that, if firms compete for talent, they cannot insure workers against this risk, so that the more risk-averse workers will choose less
quality-revealing jobs. This lowers expected productivity and salaries. Our model predicts that public unemployment insurance corrects this inefficiency, increasing employment in talent-sensitive industries. This prediction is consistent with the distribution of U.S. employment across occupations and states. Unemployment insurance dominates legal restrictions on firms' dismissals, which penalize more talent-sensitive firms and thus depress expected productivity.
Keywords: Talent, Learning, Layoff Risk, Unemployment Insurance
JEL Classification: D83, J24, J63, J65
Suggested Citation: Suggested Citation
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
HOME PAGE: http:/www.ecgi.org