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Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium

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  • Coles, Melvyn
  • Masters, Adrian

Abstract

In the context of a standard equilibrium matching framework, this paper considers how a duration dependent unemployment insurance (UI) system affects the dynamics of unemployment and wages in an economy subject to stochastic job-destruction shocks. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 31 (2007)
Issue (Month): 9 (September)
Pages: 2879-2898

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Handle: RePEc:eee:dyncon:v:31:y:2007:i:9:p:2879-2898

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  1. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
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Cited by:
  1. Torben M. Andersen & Michael Svarer, 2010. "Business Cycle Dependent Unemployment Insurance," Economics Working Papers 2010-16, School of Economics and Management, University of Aarhus.
  2. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
  3. Miquel Faig, 2008. "Labor Market Cycles and Unemployment Insurance Eligibility," 2008 Meeting Papers 183, Society for Economic Dynamics.
  4. Andrey Launov & Klaus Wälde, 2010. "Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits," CESifo Working Paper Series 3069, CESifo Group Munich.
  5. Regev, Tali, 2012. "Unemployment compensation under partial program coverage," Labour Economics, Elsevier, vol. 19(6), pages 888-897.
  6. Min Zhang, 2010. "Unemployment Insurance Eligibility, Moral Hazard and Equilibrium Unemployment," Working Papers tecipa-405, University of Toronto, Department of Economics.

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