Specific Skilled Labor and the Demand for Social Insurance

Quarterly Journal of Political Science, Vol. 7, Issue 1. 2012

33 Pages Posted: 27 Aug 2008 Last revised: 19 Dec 2011

See all articles by Jerry Nickelsburg

Jerry Nickelsburg

University of California, Los Angeles (UCLA) - Anderson Forecast

Jeffrey F. Timmons

NYU Abu Dhabi

Date Written: April 2, 2011

Abstract

The relationship between specific skills and the welfare state is contested. To help resolve the conflict, we present a general model of preferences over social insurance with endogenous wages and investment in specific skills and a variety of exogenous constraints. Our dynamic model underscores the link between wages, skills and unemployment risks. It shows that skill-specificity will not affect preferences for insurance when wages adjust for investment costs and unemployment risks. We validate this part of the model with U.S. data. We then extend the model to show how different conditions, including centralized wage bargaining, capital market imperfections and taxation, affect skill formation and skill-based preferences for social insurance. These extensions provide testable hypothesis about political support for the welfare state. Our model reconciles the disparate empirical findings and demonstrates how they, along with Iversen and Soskice’s seminal results, are special cases of the interaction between labor markets and politics.

A final, revised version to appear in the Quarterly Journal of Political Science, Volume 7, Issue 1, 2012, tentatively titled, "On the (Ir)relevnce of Skill Specificity for Social Insurance."

Keywords: specific skills, labor market, welfare state, human capital, wages, centralized bargaining

JEL Classification: J00, J41, J31, J65

Suggested Citation

Nickelsburg, Jerry and Timmons, Jeffrey F., Specific Skilled Labor and the Demand for Social Insurance (April 2, 2011). Quarterly Journal of Political Science, Vol. 7, Issue 1. 2012. Available at SSRN: https://ssrn.com/abstract=1250962 or http://dx.doi.org/10.2139/ssrn.1250962

Jerry Nickelsburg

University of California, Los Angeles (UCLA) - Anderson Forecast ( email )

110 Westwood Plaza, Suite C525
Los Angeles, CA 90095-1481
United States

Jeffrey F. Timmons (Contact Author)

NYU Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates
(971) 262 84523 (Fax)

HOME PAGE: http://https://nyuad.nyu.edu/en/academics/faculty/jeffrey-timmons.html

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