Unequal Job Security, Unemployment Scarring, and the Distribution of Welfare in a Search and Bargaining Model

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See all articles by Scott Abrahams

Scott Abrahams

Louisiana State University, Baton Rouge - Department of Economics

Date Written: January 24, 2025

Abstract

Standard job search models cannot generate the stylized facts that lower wage jobs are less stable and the best predictor of a future unemployment spell is a previous one. I develop a search model with endogenous job termination that can produce these patterns. I estimate that job destruction is about twice as likely in the first quintile of wages as the fifth, and twice as likely for workers with a recent unemployment spell. Accounting for this produces 14.7% higher inequality in time spent in unemployment and 8.3% greater dispersion in welfare. Counterfactual experiments show how unemployment insurance reduces unemployment scarring.

Keywords: job stability, unemployment scarring, job search, inequality, labor share

JEL Classification: J3, J6, D6

Suggested Citation

Abrahams, Scott, Unequal Job Security, Unemployment Scarring, and the Distribution of Welfare in a Search and Bargaining Model (January 24, 2025). Available at SSRN: https://ssrn.com/abstract=

Scott Abrahams (Contact Author)

Louisiana State University, Baton Rouge - Department of Economics ( email )

Department of Economics
Baton Rouge, LA 70803-6308
United States

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