On the extent of re-entitlement effects in unemployment compensation

We analyze the implications of two-tier unemployment compensation systems with non-automatic eligibility in an equilibrium matching model with Nash bargaining. As eligibility for UI does not automatically follow from employment, the two types of unemployed workers have different threat points, which delivers equilibrium wage dispersion. The parameters of the model are estimated for France, and the model is also calibrated for Denmark and the U.S. Re-entitlement effects are shown to be sizeable for all three countries. For France, re-entitlement effects lower by 15% the rise in the wage and by 25% the rise in unemployment following a 10% increase in the benefit level. Finally, we show that in all three countries the optimal compensation system is characterized by time-decreasing unemployment benefits and non-automatic eligibility for UI, with higher levels of both UI and UA benefits, a smaller decrease in benefits over time, and a longer employment duration required for UI eligibility than in the current system.     

Taxes on labour and unemployment in a shirking model with union bargaining

This paper studies the impact of a cut in labour taxes in a model that combines two explanations for equilibrium unemployment: employee shirking and union bargaining. It is shown that if the ratio of unemployment compensation to the net-of-tax wages is kept fixed, a tax cut leads to higher unemployment. When the unemployment benefits are fixed in real terms, the effect of a tax cut on unemployment is ambiguous. Adverse employment effects are ruled out if unions are powerless or the labour share is constant.     

Household behavior under income uncertainty in a monocentric urban area

For a household living outside of but commuting to and from the CBD of an urban area and experiencing income uncertainty, housing consumption and location (distance from the CBD) are inversely related to the probability of unemployment and directly related to the level of unemployment compensation under fairly unrestrictive assumptions. Under more restrictive assumptions, it is found that these variables are inversely related to housing price and transportation costs. Finally, income compensation causes housing consumption and location to be directly related to the probability of unemployment and the level of unemployment compensation.     

Unemployment compensation under partial program coverage

More than half of the unemployed in the U.S. are not covered by unemployment insurance. For them the provision of employment-dependent UI creates an additional benefit from work: future UI eligibility. This paper explores the overall and distributional effects of providing unemployment compensation under partial coverage. I extend a standard search model to accommodate eligible and non-eligible workers, where eligibility status is determined by previous separation history. While the effect of unemployment benefits on unemployment duration and post unemployment wages is theoretically ambiguous, a calibration of the model to the U.S. economy shows that unemployment benefits raise the unemployment rate. In addition I show that wage gaps and unemployment duration differentials between the eligible and non-eligible exist and are larger when layoffs are high.     

The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule

This paper analyses the effects of unemployment insurance benefits on unemployment exits and subsequent labour market outcomes. We exploit a piecewise linear relationship between the previous wage and benefits in Finland to identify the causal effects of the benefit level by using a regression kink design. Although we only find weak evidence of an effect on the time to the next job, higher benefits decrease the time spent in part-time unemployment and thus result in more full-time unemployment. The re-employment probability and post-unemployment wage are also negatively affected. The results for the duration of the first post-unemployment job are not conclusive, but in total both employment and earnings in the two years following the beginning of the unemployment spell decrease with higher benefits.     

Productivity insurance: The role of unemployment benefits in a multi-sector model

We construct a multi-sector search and matching model where the unemployed receives idiosyncratic productivity shocks that make working in certain sectors more productive than in the others. Agents must decide which sector to search in and face moving costs when leaving their current sector for another. In this environment, unemployment is associated with an additional risk: low future wages if mobility costs preclude search in the appropriate sector. This introduces a new role for unemployment benefits – productivity insurance while unemployed. For plausible parameterizations unemployment benefits increase per-worker productivity. In addition, the welfare-maximizing benefit level decreases as moving costs increase.     

Unemployment duration and the interactions between unemployment insurance and social assistance

Existing studies suggest that reforms that reduce the generosity of the unemployment benefits should lower unemployment. Despite the large number of such reforms implemented in Europe in the past decades, evidence from various data sources shows very little correlation with the evolution of unemployment. This paper suggests that the scant success of these labour market reforms can be explained by the interactions between unemployment insurance and other social assistance programmes. Evidence from the European Community Household Panel shows that recipients of unemployment insurance who are also eligible for other welfare schemes are indeed less sensitive to changes in the level and the duration of their benefits.     

How do extended benefits affect unemployment duration? A regression discontinuity approach

This paper studies a targeted program that extends the maximum duration of unemployment benefits from 30 weeks to 209 weeks in Austria. Sharp discontinuities in treatment assignment at age 50 and at the border between eligible regions and control regions identify the effect of extended benefits on unemployment duration. Results indicate that the duration of job search is prolonged by at least 0.09 weeks per additional week of benefits among men, whereas unemployment duration increases by at least 0.32 weeks per additional week of benefits for women. This finding is consistent with a lower early retirement age applying to women.     

An efficiency wage approach to reconciling the wage curve and the Phillips curve

This study develops an efficiency wage model that generates a wage curve at the regional level and a Phillips curve at the national level, under the assumption that workers' efficiency depends on both regional and aggregate labor market conditions. An equation relating wages to unemployment and lagged wages is derived from the profit-maximizing behavior of firms, and it is demonstrated that the coefficient on lagged wages is less than 1 with regional data but equals 1 with aggregate data. In addition, there is an equilibrium relationship between unemployment and wages at the regional level, but not at the aggregate level.     

Unemployment insurance and job turnover in Spain

The aim of this paper is to shed some light on the potential relationships between the unemployment insurance system and labour market turnover. This study assumes the incentives embedded in the unemployment insurance system have a heterogeneous impact, depending on the type of labour market transition (quits versus layoffs and recalls versus new job entrances) and on a worker's attachment to the labour market (gender and type of contract). The layoff hazard rate increases as workers qualify for unemployment benefits, whilst the quit hazard rate remains stable. Similarly, employment inflow increases sharply after the exhaustion of unemployment benefits. The timing and importance of the exit differ between recalls and new job entry and depend on a worker's attachment to the labour market. The results show that unemployment benefits appear to favour job turnover and both firms' and workers' decisions seem to matter.     

Search frictions,real wage rigidities and the optimal design of unemployment insurance

In this paper, we study the optimal unemployment benefits financing scheme when the economy is subject to labor market imperfections characterized by real wage rigidities and search frictions. The US unemployment insurance financing is such that firms are taxed proportionately to their layoffs to finance unemployment benefits. Using DSGE methodology, we investigate how policy instruments should interact with labor market imperfections. It is shown that wage rigidities in a search and matching environment cause welfare costs, especially in the absence of an incentive-based unemployment insurance. This cost is mainly due to the distorting effect of wage rigidities which generate inefficient separations. We show that the optimal unemployment benefits financing scheme – corresponding to the Ramsey policy – offsets labor market imperfections and allows implementation of the Pareto allocation. The second-best allocation brings the economy close to the Ramsey allocation. The implementation of the optimal policies clearly highlights the role of labor market institutions for short-run stabilization.     

失地农民问题的成因分析及解决对策

城市化进程中的失地农民问题已成为困扰我国社会和谐和稳定的严重问题。因而从城市化与市场化、公共事业用地、各项制度及征地补偿等方面来分析产生失地农民的原因,继而通过合理规划,消除制度性障碍,完善补偿机制等方面的措施,达到少占用农民土地,尽可能不占地,并切实提高已占用土地的利用效率,这样既保护了有限的土地资源,保证我国的粮食安全,又减少了一大批新的失业大军,使农民有所依靠,从而也保证了社会稳定,这也对和谐社会的建设具有重要意义。     

Optimal unemployment policy in a matching equilibrium

This paper considers optimal unemployment policy in a matching equilibrium with risk averse workers and unobserved job search effort. The Planner chooses unemployment benefits, taxes and job creation subsidies to maximise a Utilitarian welfare function. Optimal policy involves a trade-off between higher employment taxes (which finance more generous unemployment benefits) and greater market tightness (which reduces the average unemployment spell). Optimal UI implies the initial UI payment equals the wage, thus ensuring consumption is smooth across the job destruction shock, and UI payments then fall with duration.     

Do Low‐Wage Workers React Less to Longer Unemployment Benefits? Quasi‐Experimental Evidence*

The fact that unemployed workers have different abilities to smooth consumption entails heterogeneous responses to extended unemployment benefits. Our empirical exercise explores a quasi‐experimental setting generated by an increase in the benefits entitlement period. The results suggest a hump‐shape response of unemployment duration over the one‐year pre‐unemployment wage distribution; individuals at the bottom and top of the wage distribution reacted less than those in the interquartile range. This behaviour of job searchers is consistent with labour supply models with unemployment insurance and savings. It questions the optimality of very long entitlement periods to target the unemployment experiences of low‐wage workers.     

Spell durations with long unemployment insurance periods

This paper uses data from a natural experiment to investigate the potential incentive effect of a fixed unemployment insurance period. We compare two large groups of Norwegian unemployed persons who registered as unemployed in 1990 and 1991. The last group was affected by a rule change that in practice extended the length of unemployment benefits to more than 3 years. Our data are taken from official records, and we construct unemployment durations by combining information from the unemployment registers with employers' records. We use a proportional hazard model with a flexible baseline. The results suggest that the main effect of benefits running out is to make people drop out of the unemployment register. We find neither clear evidence that the hazard into employment increased when the end of benefits approached in the pre-liberalisation group, nor that behaviour in this part of the spells changed after the reform. On the other hand, our results suggest that the reform had an all over negative effect on the employment hazard.     

4 Years to Abolish Unemployment

Arguments for the reduction in unemployment in the UK have ranged from reflation to cuts in taxes (or benefits). Professor Tom Kronsjö (right), of the University of Birmingham, argues that return from work over benefits must be substantially increased if unemployment is to fall. His analysis is provocative, but his figures should stimulate thought and debate.     

The effect of unemployment benefits on re-employment rates: Evidence from the Finnish unemployment insurance reform

In January 2003, the unemployment benefits in Finland were increased for workers with long employment histories. The average benefit increase was 15% for the first 150 days of the unemployment spell. At the same time severance pay system was abolished. In this paper we evaluate the effect of the change in the benefit structure on the duration of unemployment by comparing the changes in the re-employment hazard profiles among the unemployed who were affected by the reform to the changes in a comparison group whose benefit structure remained unchanged. We find that the change in the benefit structure reduced the re-employment hazards by on average 17%. The effect is largest at the beginning of the unemployment spell and disappears after the eligibility period for the increased benefits expires.     

On-the-job search equilibrium with endogenous unemployment benefits

This paper develops an on-the-job search model with wage posting where unemployment benefits are proportional to past wages. We emphasize that this contributes to increasing the reservation wages of unemployed workers and introduces a feedback effect of the distribution of wages on the distribution of unemployment benefits. We show that the model predictions are consistent with some stylized French facts and quantify the impact of inefficient rejections of low-wage offers by the unemployed. We find that, by reducing the indexing of unemployment benefits to previous earnings and increasing lump-sum transfers, it is possible to increase both employment and welfare.     

Earnings-related unemployment benefits and unemployment

We show that a stronger earnings relationship of unemployment compensation reduces wages and increases employment in an economy in which wages are determined by a trade union that maximises the rent from unionisation. The opposite result applies for a utilitarian union. Using manufacturing and non-manufacturing data for 16 OECD countries, estimates suggest that a 10% increase in the earnings relationship is associated with a 1.9% fall in manufacturing wages, a 0.6% reduction in non-manufacturing wages and a 7.3% reduction in unemployment.     

Equilibrium Unemployment Dynamics in a Panel of OECD Countries

We focus on the equilibrium unemployment rate as a parameter implied by a dynamic aggregate model of wage and price setting. The equilibrium unemployment rate depends on institutional labour market institutions through mark‐up coefficients. Compared with existing studies, the resulting final equation for unemployment has a richer dynamic structure. The empirical investigation is conducted in a panel data framework and uses OECD data up to 2012. We propose to extend the standard estimation method with time dummies to control and capture the effects of common and national shocks by using impulse indicator saturation (WG‐IIS), which has not been previously used on panel data. WG‐IIS robustifies the estimators of the regression coefficients in the dynamic model, and it affects the estimated equilibrium unemployment rates. We find that wage co‐ordination stands out as the most important institutional variable in our data set, but there is also evidence pointing to the tax wedge and the degree of compensation in the unemployment insurance system as drivers of equilibrium unemployment.