Different countries are endowed with varying human-capital and regional unemployment is a common phenomenon and its potential outcome relies on labor mobility patterns and the level of capital. The regional human capital distribution endowment plays a critical role in explaining the regional and national unemployment rates. The presence of human capital has a direct influence on the unemployment rates which is supported with divergence in human capital endowment. Although economic growth has been studied for generations, supply side models have been formulated to unearth production factors for economic growth and unemployment reduction in the quest to understand the formation of human capital. Human capital refers to the stock of skills, knowledge, skills, aptitudes, training and education that people possess (Hamilton, 598). It explains the labor market`s heterogeneous nature. The neoclassical growth theory postulates that long-term economic growth can be achieved through inputs such as labor and physical capital.
Unemployment insurance is considered as a dynamic moral hazard whereby the unemployed are supposed to exert more effort to acquire jobs and this type of insurance provides consumption insurance. Continuous consumption insurances tend to discourage the search for a new job and in some circumstances increases the duration of unemployment. The unemployment insurance program is aimed at offsetting income lost by the workers due to employer cutbacks. This program is one of the single most important government programs that act as a source of help to the unemployed. The program has the cyclical effect of countering the negative impact caused by major layoffs, a recession, or seasonal cutbacks on the economy. Various reforms have been postulated in order to reduce the negative effects of unemployment while helping people who have lost jobs. Unemployment insurance can have increased effect on welfare, output and overall productivity in line with the previous contributions. The supply side of the market should be focused on so that firms` behavior can be ignored in entirety with a proper understanding of the implications of different business cycles (Acemoglu and Robert, 1198).
Acemoglu, Daron, and Robert Shimer. "Productivity gains from unemployment
insurance." European Economic Review 44.7 (2000): 1195-1224.
Hamilton, James D. "A neoclassical model of unemployment and the business cycle." The