Skill specificity is thought to increase preferences for social insurance (Iversen and Soskice 2001), especially where employment protections are low, notably the United States (Gingrich and Ansell 2012). The compensating differentials literature, by contrast, suggests that neither skill...

In this paper we argue that very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct...