Based on a model with imperfectly competitive labor and product markets the real consequences of labor market shocks for economies with either an earnings-related or flat-rate unemployment compensation system are considered. A distinctive feature of the analysis is the comparison of both unemployment compensation systems in a two-country setting. It is demonstrated that the performance of a system with earnings-related or flat-rate unemployment benefits depends on whether the labor market shock is provoked in the home country or originates from abroad. We also point out how our results extend to two-tier unemployment compensation systems which differ with respect to the relative importance of earnings-related and flat-rate benefits.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 58 (2001) Issue (Month): 1 (December) Pages: 78- Download reference. The following formats are available: HTML
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Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
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