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SOCIAL INSURANCE AND OCCUPATIONAL MOBILITY
Author(s) -
Cubas German,
Silos Pedro
Publication year - 2020
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12422
Subject(s) - microdata (statistics) , earnings , social insurance , economics , welfare , matching (statistics) , labour economics , social mobility , actuarial science , demographic economics , finance , census , market economy , population , social science , statistics , demography , mathematics , sociology
This article studies how insurance from progressive taxation improves the matching of workers to occupations. We propose an equilibrium dynamic assignment model to illustrate how social insurance encourages mobility. Workers experiment to find their best occupational fit in a process filled with uncertainty. Risk aversion and limited earnings insurance induce workers to remain in unfitting occupations. We estimate the model using microdata from the United States and Germany. Higher earnings uncertainty explains the U.S. higher mobility rate. When workers in the United States enjoy Germany's higher progressivity, mobility rises. Output and welfare gains are large.