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.
Entrepreneurship; Unemployment Insurance; Labor Market Mobility;
- 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
Alexandre Gaillard, and Sumudu Kankanamge, “Entrepreneurship and Labor Market Mobility: the Role of Unemployment Insurance”, TSE Working Paper, n. 21-1187, January 2021.
TSE Working Paper, n. 21-1187, January 2021