Job Rotation and Public Policy: Theory with Applications to Japan and the USA

Argues that the high job mobility observed most prominently among workers in Japanese firms is consistent with the behaviour of risk‐averse individuals when neither private nor public income insurance is widely available to displaced workers. Laissez faire is suboptimal and involves higher job mobility than is socially optimal. Public provision of income insurance yields a Pareto improvement and reduces job rotation. Government job training schemes may push rotation levels even higher than the levels under laissez faire and could, therefore, be counterproductive.