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Redistribution and employment policies with endogenous unemployment |
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| Authors: | Robin Boadway Nicolas Marceau |
| Institution: | a Department of Economics, Queen’s University, Kingston, ON, Canada K7L 3N6 b Department of Economics, McMaster University, Hamilton, ON, Canada L8S 4M4 c Départment des Sciences, Economiques and CREFE, Université du Québec à Montréal, P.O. Box 8888, Downtown Station, Montréal, QC, Canada H3C 3P8 |
| Abstract: | We study optimal redistribution policy in an economy with three types of unemployed persons: those unable to work, the voluntarily unemployed, and the involuntarily unemployed. Both voluntary and involuntary unemployment are endogenous. Voluntary unemployment arises because individuals have different preferences, while involuntary unemployment results from frictions in the labour market or from an efficiency wage. We consider the employment policies of a well-informed government when it can and cannot commit to its policies. The model is simple, yet rich enough to reflect real-world policies, including transfers to the disabled, welfare for non-working employables, unemployment insurance, employment subsidies, and taxes on workers and firms. |
| Keywords: | Employment policies Unemployment Redistribution |
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