Abstract
We develop a simple model of short- and long-term unemployment to study how labor market institutions interact with labor market conditions and personal characteristics of the unemployed. We analyze how the decision to exit unemployment and to mitigate human capital degradation by retraining depends on education, skill degradation, age, labor market tightness, taxes, unemployment insurance benefits and welfare assistance. We extend our analysis by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap
| Original language | English |
|---|---|
| Place of Publication | Cph. |
| Publisher | Department of Economics, University of Copenhagen |
| Number of pages | 26 |
| Publication status | Published - 2006 |
Keywords
- Faculty of Social Sciences
- unemployment
- skill degradation
- unemployment benefits
- present-biased preferences
- retraining
