UNEMPLOYMENT-INSURANCE BENEFITS AND HUMAN-CAPITAL ACCUMULATION

Public unemployment insurance benefits tend to benefit disproportionat ely the low skilled. Hence they may serve as an income insurance subst itute for human capital acquisition. As a result of their negative eff ect on the incentive to accumulate human capital, they lead to an incr eased supply of low skilled and to higher unemployment among the low s killed both in the short and long term rate. Accounting for the long t erm costs of unemployment insurance benefits may greatly increase the cost of the welfare state. (C) 1997 Elsevier Science B.V.