The Welfare Effects of Involuntary Part-Time Work

Oxford Economic Papers, Vol. 70(1), January 2018, Pages 183-205

24 Pages Posted: 4 Apr 2016 Last revised: 26 Dec 2017

See all articles by Daniel Borowczyk-Martins

Daniel Borowczyk-Martins

Copenhagen Business School

Etienne Lalé

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal; CIRANO; IZA

Date Written: June 1, 2017

Abstract

Employed individuals in the U.S. are increasingly more likely to move to involuntarily part-time work than to unemployment. Spells of involuntary part-time work are different from unemployment spells: a full-time worker who takes on a part-time job suffers an earnings loss while remaining employed, and is unlikely to receive income compensation from publicly provided insurance programs. We analyze these differences through the lens of an incomplete-market, job-search model featuring unemployment risk alongside an additional risk of involuntary part-time employment. A calibration of the model consistent with U.S. institutions and labour market dynamics shows that involuntary part-time work generates lower welfare losses relative to unemployment. This finding relies critically on the much higher probability to return to full-time employment from part-time work. We interpret it as a premium in access to full-time work faced by involuntary part-time workers, and use our model to tabulate its value in consumption-equivalent units.

Keywords: Involuntary part-time work, Unemployment, Welfare

JEL Classification: E21, E32, J21

Suggested Citation

Borowczyk-Martins, Daniel and Lalé, Etienne, The Welfare Effects of Involuntary Part-Time Work (June 1, 2017). Oxford Economic Papers, Vol. 70(1), January 2018, Pages 183-205. Available at SSRN: https://ssrn.com/abstract=2758097 or http://dx.doi.org/10.2139/ssrn.2758097

Daniel Borowczyk-Martins

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Etienne Lalé (Contact Author)

University of Quebec at Montreal (UQAM) - Université du Québec à Montréal ( email )

CP 8888 Succ Centre Ville
Montréal, Québec H3C3P8
Canada

CIRANO ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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