Specific Skilled Labor and the Demand for Social Insurance
Quarterly Journal of Political Science, Vol. 7, Issue 1. 2012
33 Pages Posted: 27 Aug 2008 Last revised: 19 Dec 2011
Date Written: April 2, 2011
Abstract
The relationship between specific skills and the welfare state is contested. To help resolve the conflict, we present a general model of preferences over social insurance with endogenous wages and investment in specific skills and a variety of exogenous constraints. Our dynamic model underscores the link between wages, skills and unemployment risks. It shows that skill-specificity will not affect preferences for insurance when wages adjust for investment costs and unemployment risks. We validate this part of the model with U.S. data. We then extend the model to show how different conditions, including centralized wage bargaining, capital market imperfections and taxation, affect skill formation and skill-based preferences for social insurance. These extensions provide testable hypothesis about political support for the welfare state. Our model reconciles the disparate empirical findings and demonstrates how they, along with Iversen and Soskice’s seminal results, are special cases of the interaction between labor markets and politics.
A final, revised version to appear in the Quarterly Journal of Political Science, Volume 7, Issue 1, 2012, tentatively titled, "On the (Ir)relevnce of Skill Specificity for Social Insurance."
Keywords: specific skills, labor market, welfare state, human capital, wages, centralized bargaining
JEL Classification: J00, J41, J31, J65
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
Private Sector Training and its Impact on the Earnings of Young Workers
-
The Impact of Training on Productivity and Wages: Evidence from British Panel Data
By Lorraine Dearden, Howard Reed, ...
-
Minimum Wages and Training Revisited
By David Neumark and William Wascher
-
Is the German Apprenticeship System a Panacea for the Us Labour Market?
By Dietmar Harhoff and Thomas J. Kane
-
Beyond the Incidence of Training: Evidence from a National Employers Survey
By Lisa M. Lynch and Sandra E. Black