The paper provides a theoretical rationale for flexicurity policies, which consist of low employment protection, generous unemployment insurance and active labor market programmes. It analyzes in which conditions flexicurity can be optimal. Low employment protection encourages costly education...

This paper studies the welfare and policy implications of globalization when risk averse workers face the risk of unemployment. If the jobs performed by domestic workers can be easily substituted by imports, then globalization reduces wages and increases unemployment. In this situation, in the...