Unemployment Durations in West Germany Before and After the Reform of the Unemployment Compensation System during the 1980s

Abstract. This paper analyzes empirically the distribution of unemployment durations in West Germany during the 1980s and 1990s. It therefore covers periods before and after the changes during the mid‐1980s in the maximum entitlement periods for unemployment benefits for older unemployed. The analysis is based on the IAB employment subsample containing administrative data for about 500,000 individuals. Since these data only partly reveal the unemployment duration in an economic sense, we use a narrow and a wide proxy for unemployment. Our empirical analysis finds significant changes in the distribution of non‐employment durations for older unemployed. At the same time, the distribution of unemployment durations between jobs remained unchanged after the reforms. Our findings clearly show that many firms and workers used the more beneficial laws as a part of early retirement packages. Surprisingly, for those workers who found and accepted a new job, we do not observe a prolongation of their search periods to a sizeable extent.     

Optimal Social Insurance with Endogenous Health*

In this paper, I analyze optimal insurance against unemployment and disability in a private information economy with endogenous health and search effort. Individuals can reduce the probability of becoming disabled by exerting prevention effort. I show that the optimal sequence of consumption is increasing for a working individual and constant for a disabled individual. During unemployment, decreasing benefits are not necessarily optimal. The prevention constraint implies increasing benefits while the search constraint demands decreasing benefits while being unemployed. However, if individuals respond sufficiently to search incentives, the latter effect dominates the former and the optimal consumption sequence is decreasing during unemployment.     

Potential duration of unemployment benefits and labor market outcomes for older workers with health impairments in Germany

This research note estimates the causal effects of a cut in the potential duration of regular unemployment benefits for older workers in Germany on the labor market outcomes of individuals with health impairments. The analyzed reform is a natural experiment that allows a difference-in-differences strategy with treatment intensity. The results provide evidence for a significant decrease in the number of days in regular unemployment benefits and an increase in the number of days in employment. However, the results also suggest a significant increase in the number of days in unemployment (social) assistance, which are granted upon exhaustion of regular unemployment benefits.     

Worker Absenteeism in Search Equilibrium*

In this paper we introduce a general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms maximize profits while recognizing that the compensation package may affect the queue of job applicants and the absence rate. The analysis provides results concerning the effects of social insurance benefits and other determinants of workers' and firms' behavior. The normative analysis identifies externalities associated with firm‐provided sick pay and examines the welfare implications of alternative policies.     

不完全劳动市场、政府干预与失业率

本文针对我国不完全的劳动市场,建立了一个短视一搜寻模型,目的是要说明,第一,虽然政府直接干预下的就业率高于无政府干预的劳动市场的均衡就业率,但是后者的社会总福利水平高于前者,而且,无政府干预情形下失业者的福利水平不会低于政府干预时在低工资岗位上的就业者的福利水平.这说明政府直接干预劳动市场虽然有可能降低失业率,但可能导致整个社会福利损失,也不利于提高低收入人群的福利水平.第二,我国现行的社会保障制度、户籍制度以及地方保护政策妨碍城乡劳动力自由流动,造成城市居民一般占据了工资较高的岗位,农村居民一般只能找到工资较低的岗位.这种匹配过程达到的劳动市场均衡,虽然有可能最大限度降低城镇失业率,但不是使得全国总失业率最低的均衡.     

Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?

Abstract. This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare.     

Optimal welfare and in-work benefits with search unemployment and observable abilities

This paper explores the optimal interaction between the tax system and social assistance in insuring people against the risks of involuntary unemployment and low ability. To that end, we introduce search unemployment in a model of optimal non-linear income taxation. The relationship between welfare benefits and the optimal level of in-work benefits is U-shaped. This explains why in-work benefits are called for both in countries that grant low welfare benefits and countries that provide high welfare benefits. An earned-income tax credit optimally induces all agents to look for work if job search is cheap and effective, agents are not very risk averse, and the least-skilled agents are relatively productive.     

Double Dividend with Involuntary Unemployment: Efficiency and Intergenerational Equity

This paper analyzes the double dividend and distributional issues within an overlapping generations model framework with involuntary unemployment. We characterize the necessary conditions needed to obtain a double dividend, when the revenue of the environmental tax is recycled by a variation of the labor tax rate. We show that an employment dividend may occur without any efficiency dividend and that the young generation is not always harmed by the fiscal reform, even without any intergenerational transfers. Therefore, three dividends (environmental, efficiency and intergenerational equity) can occur simultaneously.     

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。     

Optimal Social Insurance with Linear Income Taxation*

We study optimal social insurance aimed at insuring disability risk in the presence of linear income taxation. Optimal disability insurance benefits rise with previous earnings. Optimal insurance is incomplete even though disability risks are exogenous and verifiable so that moral hazard in disability insurance is absent. Imperfect insurance is optimal because it encourages workers to insure themselves against disability by working and saving more, thereby alleviating the distortionary impact of the redistributive income tax on labor supply and savings.     

Unemployment and Right‐wing Extremist Crime*

It is frequently argued that unemployment plays a crucial role in the occurrence of right‐wing extremist crimes (RECs). We test this hypothesis empirically using data from Germany. We find that right‐wing criminal activities occur more frequently when unemployment is high. The substantial difference in the numbers of RECs occurring in the East and West German states can mostly be attributed to differences in unemployment. This finding reinforces the importance of unemployment as an explanatory factor for RECs, and it questions explanations based solely on the different socialization in former communist East Germany and the liberal West German states.     

Unemployment Benefits and Entrepreneurship

Several recent empirical papers show that unemployment benefits crowd out nascent entrepreneurs. In the present paper provide theoretical support in favour of this interesting result. Over fairly general preference patterns we obtain a measure of the opportunity cost of entrepreneurs in the presence of unemployment benefits and derive conditions under which potential entrepreneurs suffer as unemployment benefits rise. We formulate a clear transmission mechanism in the labour market that links unemployment benefits to occupational choice for a group of risk‐averse individuals.     

Do Lower Caseloads Improve the Performance of Public Employment Services? New Evidence from German Employment Offices

The caseworker‐to‐clients ratio is an important, but understudied, policy parameter that affects both the quality and cost of public employment services that help job seekers find employment. We exploit a large‐scale pilot by Germany's employment agency, which hired 490 additional caseworkers in 14 of its 779 offices. We find that lowering caseloads caused a decrease in the rate and duration of local unemployment as well as a higher re‐employment rate. Disentangling the mechanisms that contributed to this improvement, we find that offices with lowered caseloads increased monitoring and imposed more sanctions but also intensified search efforts and registered additional vacancies.     

Profit Sharing,Credit Market Imperfections and Equilibrium Unemployment*

We investigate the interaction between labour and credit market imperfections for equilibrium unemployment in the presence of profit sharing. In a partial equilibrium with exogenous outside options, increased bargaining power of banks has adverse employment effects. In a general equilibrium with endogenous outside options, this relationship is frequently reversed; reduced credit market imperfections increase equilibrium unemployment if the labour market imperfections—measured by the bargaining power of trade unions—are sufficiently strong and the benefit–replacement ratio is sufficiently high. Finally, we show that higher bankruptcy risks increase equilibrium unemployment under similar conditions.     

A Search Model of Unemployment and Inflation*

This paper introduces money into the standard labor‐matching model. A double‐coincidence problem makes money necessary as a medium of exchange. In the long run, a rise in the growth rate of money leads to higher inflation and higher unemployment, such that the long‐run Phillips curve is not vertical. The optimal monetary growth rate decreases with greater worker bargaining power, the level of unemployment benefits, and the payroll tax rate.     

Optimal Taxation of Risky Human Capital*

In a two‐period life‐cycle model with ex ante homogeneous households, earnings risk, and a general earnings function, we derive the optimal linear labor tax rate and optimal linear education subsidies. The optimal income tax trades off social insurance against incentives to work. Education subsidies are not used for social insurance, but they are only targeted at offsetting the distortions of the labor tax and internalizing a fiscal externality. Both optimal education subsidies and tax rates increase if labor and education are more complementary, because education subsidies indirectly lower labor tax distortions by stimulating labor supply. Optimal education subsidies (taxes) also correct non‐tax distortions arising from missing insurance markets. Education subsidies internalize a positive (negative) fiscal externality if there is underinvestment (overinvestment) in education because of risk. Education policy unambiguously allows for more social insurance if education is a risky activity. However, if education hedges against labor‐market risk, optimal tax rates could be lower than in the case without education subsidies.     

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.     

Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model

We analyse the effects of different labour‐market policies (employment protection, unemployment benefits, and payroll taxes) on job creation and technology choices in a model where firms are matched with workers of different productivity and wages are determined by ex post bargaining. The model is characterized by two intertwined sources of inefficiency, namely a matching externality and a hold‐up externality associated with the bargaining strength of workers. The results depend on the relative importance of the two externalities and on worker risk aversion. “Flexicurity”, meaning low employment protection and generous unemployment insurance, can be optimal if workers are sufficiently risk‐averse and the hold‐up problem is relatively important.     

The Layoff Rat Race*

We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments, especially in specific human capital, contribute more to a firm's bottom line, so that workers who make those investments will be laid off last. We show that as long as workers' bargaining positions are not too weak, workers invest in specific human capital in order to reduce layoff probabilities. Indeed, workers over‐invest in skill acquisition from a social perspective whenever their bargaining power is strong enough, even though they only receive a share of any investment. More generally, we characterize how equilibrium skill investments are affected by the distribution of worker abilities within firms, the probability that a firm will downsize, and the distribution of employment opportunities in the economy.     

金融危机背景下我国失业保险制度的功能缺失与制度优化

近年来,我国的就业形势不容乐观,金融危机背景下更凸显出失业保险制度保障功能的缺失。通过制度升级与优化,使失业保险制度的功能从被动事后保障转向主动提前介入,使其定位从“保生活”扩大到稳定就业、促进再就业和预防失业。应成为失业保险制度的改革与发展方向。