nep-ltv New Economics Papers
on Unemployment, Inequality and Poverty
Issue of 2006‒02‒19
two papers chosen by
Maximo Rossi
Universidad de la Republica

  1. A Model of Income Insurance and Social Norms By Lindbeck, Assar; Persson, Mats
  2. Employees Who Become Self-Employed: Do Labour Income and Wages Have an Impact? By Pernilla Andersson; Eskil Wadensjö

  1. By: Lindbeck, Assar (Institute for International Economic Studies, Stockholm University); Persson, Mats (Institute for International Economic Studies, Stockholm University)
    Abstract: A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint†can make the individual abstain from fraud (“mimickingâ€). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willingness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.
    Keywords: Moral hazard; sick pay insurance; labor supply; asymmetric information
    JEL: G22 H53 I38 J21
    Date: 2006–02–14
    URL: http://d.repec.org/n?u=RePEc:hhs:iiessp:0742&r=ltv
  2. By: Pernilla Andersson (SOFI, Stockholm University); Eskil Wadensjö (SOFI, Stockholm University and IZA Bonn)
    Abstract: This paper analyzes the self-employment decision among Swedish-born male employees. The main objective of the paper is to investigate the impact of the relation between the actual and the predicted income on the probability to become self-employed. The predicted income is calculated from a standard income regression with controls for age, education, family status, family background and place of residence. By construction of a ratio between the actual and the predicted income we identify three groups of employees: (1) employees who have an actual income lower than the predicted income (underpaid), (2) employees with an actual income close to the predicted one, and (3) employees with an actual income higher than the predicted one (overpaid). The first question is if individuals who are "overpaid" or "underpaid" are more likely to become self-employed than those who are paid as we can expect. Our main finding is that employees who receive an income that differs from the one predicted by the income regression are more likely to become self-employed. We also analyse the effect of the ratio on four different measures of success as self-employed: income from self-employment, number of employees, turnover of the firm, and the probability to have a firm registered as a limited liability company. The general conclusion is that those who performed well as employees are also more successful as self-employed.
    Keywords: self-employment, occupational choice, occupational mobility, labour income, wages
    JEL: J23 J24 J30 J62
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1971&r=ltv

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