In this paper we propose a non-equilibrium model in order to explain the search behavior of unemployed workers. This modeling strategy, framed in a rational choice paradigm, allows us to investigate the effects of negative duration dependence in the out-of-unemployment hazard rate, accounting for a decrease in employability as the unemployment spell lengthens. We show that individuals react to an expected reduction in their search effectiveness by increasing their search efforts. We then analyze active and passive labor market policies, consisting in training programs and income support schemes. We show that it is optimal for the government to include among the eligibility criteria for subsidized training a minimum length of the unemployment spell. However, it is optimal to recruit workers before they become discouraged and stop searching. We also show that for a broad range of the parameters the optimal income support scheme takes the form of unemployment benefits granted for a limited amount of time starting from the beginning of the unemployment spell, coupled with social assistance for long-term unemployed with very limited residual employability.

Active and Passive Policies Against Poverty with Decreasing Employability

RICHIARDI, MATTEO GUIDO;CONTINI, Dalit
2006

Abstract

In this paper we propose a non-equilibrium model in order to explain the search behavior of unemployed workers. This modeling strategy, framed in a rational choice paradigm, allows us to investigate the effects of negative duration dependence in the out-of-unemployment hazard rate, accounting for a decrease in employability as the unemployment spell lengthens. We show that individuals react to an expected reduction in their search effectiveness by increasing their search efforts. We then analyze active and passive labor market policies, consisting in training programs and income support schemes. We show that it is optimal for the government to include among the eligibility criteria for subsidized training a minimum length of the unemployment spell. However, it is optimal to recruit workers before they become discouraged and stop searching. We also show that for a broad range of the parameters the optimal income support scheme takes the form of unemployment benefits granted for a limited amount of time starting from the beginning of the unemployment spell, coupled with social assistance for long-term unemployed with very limited residual employability.
RICHIARDI MATTEO GUIDO; CONTINI DALIT
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/94719
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact