Unemployment insurance, moral hazard, and economic growth

It is important but difficult to distinguish between desirable and undesirable effects of unemployment insurance (UI) that are observationally equivalent when designing optimal UI schemes. For example, a UI-induced rise in the wage rate caused by workers taking more time to match their skills with job vacancies is desirable. However, another view of the same observation is that UI causes permanently higher involuntary unemployment by raising the reservation wage. This paper avoids this problem by regarding the trade-off between the UI replacement rates and unemployment as an intermediate relationship that matters only as far as it impacts economic growth. An empirical analysis of UI replacement rates, unemployment rates, and growth rates using annual panel data finds UI replacement rates are associated with higher unemployment. However, no significant relationship is found between UI-related unemployment and the real growth rate of gross domestic product.An earlier version of this paper was presented at the Fiftieth International Atlantic Economic Conference, October 15–18, 2000, Charleston, South Carolina. Financial support from the Scottish Economic Society and the University of Stirling is gratefully acknowledged. The Organization for Economic Cooperation and Development generously provided access to their database on benefit entitlements and gross replacement rates. The authors are grateful to an anonymous referee for constructive comments.     

Unemployment insurance with hidden savings

This paper studies the design of unemployment insurance when neither the searching effort nor the savings of an unemployed agent can be monitored. If the principal could monitor the savings, the optimal policy would leave the agent savings-constrained. With a constant absolute risk-aversion (CARA) utility function, we obtain a closed form solution of the optimal contract. Under the optimal contract, the agent is neither saving nor borrowing constrained. Counter-intuitively, his consumption declines faster than implied by Hopenhayn and Nicolini (1997) [1]. The efficient allocation can be implemented by an increasing benefit during unemployment and a constant tax during employment.     

Unemployment insurance design: Inducing moving and retraining

Evidence suggests that unemployed individuals can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex ante. The problem of characterizing constrained optimal unemployment insurance in this case has been neglected in previous literature. We construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled. The model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobservable job-search. Absent wealth effects on behavior, we derive closed-form solutions showing that when the moving/retraining incentive constraint binds, unemployment benefits should increase over the unemployment spell, with an initial period with low benefits and an increase after this period has expired.     

Unemployment insurance and union bargaining — an insider-outsider approach

A trade union is required to tax its own members to fund unemployment benefit paid to its unemployed members in an insider-outsider model of union bargaining over wages and employment. An increase in unemployment benefit imposed by the government increases employment overall but not necessarily the employment of insiders if the tax rate is exogenously fixed by the government.This paper has benefited from comments of Mick Common, Dipak Ghosh, Bob Hart, and Robin Ruffell. The comments of two anonymous referees and the advice of the Editor have greatly improved the presentation of the paper. Any remaining errors or omissions are the responsibility of the authors.     

Unemployment insurance benefits and the supply of labor of an employed worker

The unemployment insurance program is believed to adversely affect the supply of labor of the unemployed. Yet, it generates favorable incentives for the employed. Since unemployment benefits are aimed to compensate the unemployed for earnings loss, of which past earnings serve as a practical measure, a worker might choose to increase his efforts when employed, insuring himself partially against future unemployment. However, this possible impact on labor supply has escaped any attention until very recently. Incorporating an earnings-related benefits scheme into a multi-period decision model, the present paper investigates the labor supply behavior of an insured worker over time.     

Unemployment insurance: The role of electoral systems and regional labour markets

Levels of insurance against unemployment vary considerably across countries. Replacement rates, the ratio relating income from unemployment to what people earned when they were employed, are higher in countries with proportional electoral systems than in countries with majoritarian systems. Also, replacement rates are positively correlated with per capita income and negatively correlated with the countries' unemployment rates. I develop an electoral competition model that replicates these stylized facts.     

工人离职、失业波动与失业保险文献评述

失业不仅涉及失业波动的影响,还包括在职工人的离队。为减少工人搜寻过程中产生的负外部性,应降低工人的信息成本。失业保险政策的实施又降低了失业工人再就业的激励性,应确立有效的失业保险水平,实现产出与社会福利的最大化。     

Unemployment,wages and pensions

Empirical evidence has shown the existence of a negative relationship between the rates of unemployment and real wages. If pensions are computed according to the wages that workers have contributed, then the unemployment rates during working life may also influence the pensions to which they are entitled. Using data from 2005 to 2012 for the Spanish social security system, we estimate that the unemployment elasticity of real pension is ?0.135. A 1% increase in unemployment rate is associated with a reduction in pension equal to 0.135%. In ‘normal times’, this value could be considered modest, but the Great Recession has increased dramatically the rate of unemployment. In 2012, the rate of unemployment in Spain had increased to 25.7% and in 2015, it had diminished to 20.9%. It is estimated that unemployment rate will not be returned to figures existing before the crisis until middle of the next decade. Moreover, the current reforms in social security systems could interact with the future effects of the current rates of unemployment and cause future pensions to be significantly lower than those estimated by individuals. The economic welfare of the future cohorts of retirees would then be significantly worsened.     

社会排斥、贫困和失业

本文主要分析了社会排斥、贫困和失业三者之间的关系,提出了社会排斥概念的三个要素：(1)相对性;(2)能动性;(3)动态性。在着重讨论了社会保障收入对社会排斥的影响以及雇主在劳动力市场上的作用之后,文章认为社会保障收入是重要的,不能取消社会保障收入项目。社会排斥不仅与失业有关,而且政府政策也可能影响社会排斥,有必要检验所有政策建议对提高社会融合的作用。     

Technological Progress, Downsizing and Unemployment

This paper presents a model where the form of innovations is endogenous. It is shown that with labour market imperfections, which raise the wage above the shadow price of labour, firms over-invest in innovations cutting labour costs and under-invest in increasing quality. As a result, the market outcome features lower long run growth, higher unemployment and lower welfare than the social optimum. It is further shown that a firm's incentives to cut labour costs are increased as wages rise and as the firm declines. Finally, a rise in competition increases incentives to downsize for firms with below average quality performance.     

搜索、政府花费和失业

本文在将搜索理论和经典的经济增长理论结合的基础上引入生产性政府花费，讨论了政府花费对就业和消费的影响。利用最一般的生产和效用函数，证明了均衡状态存在的唯一性。当失业工人和空闲职位的匹配是有效时，表示经济系统的四维动力系统存在一个稳定的二维流形。     

Urban Unemployment, Factor Accumulation, and Welfare

This paper shows that, contrary to the conventional wisdom, economic expansion (factor accumulation) may be immiserizing in the mobile capital Harris-Todaro model if scarcity of land is introduced in agricultural production. The effect of factor accumulation on the level of unemployment is examined, and precise conditions for the expected response are derived.     

Labor Market Integration, Unemployment, and Transfers

Integration of the labor markets between a rich country (North) and a poor country (South) often leads to high unemployment in the South and transfers from North to South; for instance: United States versus Puerto Rico, West versus East Germany, Northern versus Southern Italy. This paper presents a general equilibrium model in which workers finance a transfer to the unemployed in the South in order to limit migration. In addition, it extends the framework to consider: the difference in efficiency between natives and immigrants, taxes on fixed factors in the North with internal transfers, and subsidies to the employed in the South.     

Export Bans, Environmental Protection, and Unemployment

This study investigates the case for an export ban on intermediate goods which generate environmental damage. Since export restrictions on intermediates have long been advocated as a method of stimulating domestic industries in developing countries, we consider whether the case for an export ban is strengthened or weakened by the presence of unemployment in the industrial sector. We find that, in the short run, an export restriction worsens unemployment, thus weakening the case for a ban. In the long run, however, the results are reversed. If the environmental problem is severe, unemployment has a negligible impact on the case for an export ban.     

Social Interactions, Local Spillovers and Unemployment

I analyse a model that explicitly incorporates local interactions and allows agents to exchange information about job openings within their social networks. Agents are more likely to be employed if their social contacts are also employed. The model generates a stationary distribution of unemployment that exhibits positive spatial correlations. I estimate the model via an indirect inference procedure, using Census Tract data for Chicago. I find a significantly positive amount of social interactions across neighbouring tracts. The local spillovers are stronger for areas with less educated workers and higher fractions of minorities. Furthermore, they are shaped by ethnic dividing lines and neighbourhood boundaries.     

Technological Complexity, Wage Differentials and Unemployment

A model is developed to analyse the relation between wages and technological complexity, as characterised by the "O–ring" theory of production. In equilibrium, the adoption of a relatively complex technology induces the employer to pay higher wages. We argue that the model can explain increased within–group wage inequality as a consequence of increased technological heterogeneity among firms.
JEL classification : J 31; O 33     

Unemployment, Factor Substitution and Capital Formation

Abstract. We incorporate a wage-bargaining structure in a dynamic general equilibrium model and show how this feature changes short- and long-run properties of equilibria compared with a perfectly competitive setting. We discuss how employment, capital and income shares respond to wage-setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution between labour and capital. Values of the elasticity below unity add persistence, tend to preserve stability and lead to empirically plausible adjustment patterns. By contrast, values above unity introduce additional volatility, thereby making steady states potentially unstable.     

Fiscal Policy,Economic Integration and Unemployment

In this paper fiscal policy is examined for an open economy characterized by unemployment due to efficiency wages. We allow for capital and firm mobility in a model where the government chooses the level of wage, source-based capital and profit taxation. The taxing choices of governments are analyzed in scenarios which differ with respect to the constraints imposed on the set of available taxes and on the mobility of firms. As a general result, the welfare loss from labor market imperfections increases when tax bases become internationally mobile, which suggests an increasing relevance of domestic labor-market reforms when tax bases become global.