Talent Discovery, Layoff Risk and Unemployment Insurance

41 Pages Posted: 2 Aug 2017 Last revised: 27 May 2018

See all articles by Marco Pagano

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Luca Picariello

University of Naples Federico II, Center for Studies in Economics and Finance (CSEF)

Multiple version iconThere are 2 versions of this paper

Date Written: May 22, 2018

Abstract

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 and investment in education. The hypothesis that the generosity of unemployment insurance should be positively correlated with the share of workers in talent-sensitive industries is consistent with international and U.S. evidence.

Keywords: Talent, Learning, Layoff Risk, Unemployment Insurance

JEL Classification: D61, D83, I20, J24, J63, J65

Suggested Citation

Pagano, Marco and Picariello, Luca, Talent Discovery, Layoff Risk and Unemployment Insurance (May 22, 2018). Available at SSRN: https://ssrn.com/abstract=3012277 or http://dx.doi.org/10.2139/ssrn.3012277

Marco Pagano (Contact Author)

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Luca Picariello

University of Naples Federico II, Center for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Naples, Naples 80126
Italy

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