Entrepreneurship and Labor Market Mobility: the Role of Unemployment Insurance

Résumé

We evaluate the effects of unemployment insurance variations in a general equilibrium occupational choice model of entrepreneurship. We establish that the occupational flow from unemployment to entrepreneurship is remarkably sensitive to unemployment insurance generosity, corroborating our empirical findings. Beyond direct effects on unemployment, we find large reallocations between employment and entrepreneurship relative to changes in generosity. They contribute to an empirically consistent stable aggregate employment rate, despite increasing unemployment. We show that an insurance coverage effect, i.e. a change in the relative riskiness between occupations with respect to generosity, is a key driver of our results.

Mots-clés

Entrepreneurship; Unemployment Insurance; Labor Market Mobility;

Codes JEL

E24: Employment • Unemployment • Wages • Intergenerational Income Distribution • Aggregate Human Capital
J65: Unemployment Insurance • Severance Pay • Plant Closings
E61: Policy Objectives • Policy Designs and Consistency • Policy Coordination