Publication > Part III: Policies for the future > TT3
Incentives are huge in the TT scenario, but collective insurance hardly feasible. Successful workers are able to evade public insurance by moving to another country.
This outcome points to a limited role for the welfare state in Talent Towns. In the balance of gains and costs of public insurance, the gains are substantial, but the costs (in terms of moral hazard or adverse selection) are bigger.
Talent Towns (Labour market)
There is a discrepancy between demand for public insurance and its feasibility. Jobs are highly uncertain in Talent Towns, but policy is very limited in supporting them. A high rate of employment protection would discourage firms, but hardly protect jobs.Incentives are huge in the TT scenario, but collective insurance hardly feasible. Successful workers are able to evade public insurance by moving to another country.
This outcome points to a limited role for the welfare state in Talent Towns. In the balance of gains and costs of public insurance, the gains are substantial, but the costs (in terms of moral hazard or adverse selection) are bigger.