Talent Discovery, Layoff Risk and Unemployment Insurance

42 Pages Posted: 19 Nov 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: October 2, 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, 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.

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 (October 2, 2018). CFS Working Paper, No. 603, 2018. Available at SSRN: https://ssrn.com/abstract=3274341 or http://dx.doi.org/10.2139/ssrn.3274341

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

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
66
PlumX Metrics