Welfare States and Unemployment

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Welfare States and Unemployment

Author Info

Ljungqvist, Lars
Sargent, Thomas J

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Thomas J. Sargent

Abstract

This paper studies equilibrium unemployment in a search model where the government both provides liberal unemployment insurance and taxes labor at high progressive tax rates. It is shown how progressive income taxation can counteract a high unemployment rate under generous unemployment insurance. In particular, high marginal taxes reduce workers' incentives to switch jobs in response to changing economic opportunities. This lower labor mobility reduces unemployment but at the cost of a less efficient labor allocation.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 6 (1995)
Issue (Month): 1 (June)
Pages: 143-60
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Handle: RePEc:spr:joecth:v:6:y:1995:i:1:p:143-60

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Cited by:
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David Domeij, 2005. "Optimal Capital Taxation and Labor Market Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(3), pages 623-650, July. [Downloadable!] (restricted)
Alexis, PARMENTIER, 2006. "The effects of the marginal tax rate in a matching model with endogenous labor supply," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006011, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
Lars Ljungqvist & Thomas J. Sargent, 1996. "The European Unemployment Dilemma," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS). [Downloadable!]
Other versions:
- Lars Ljungqvist & Thomas J. Sargent, 1995. "The European unemployment dilemma," Working Paper Series, Macroeconomic Issues 95-17, Federal Reserve Bank of Chicago.
- Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series in Economics and Finance 178, Stockholm School of Economics.
- Ljungqvist, L & Sargent, T-J, 1997. "The European Unemployment Dilemma," Research Institute of Industrial Economics Working Papers 481, Research Institute of Industrial Economics (IFN).
- Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics. [Downloadable!]
- Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June. [Downloadable!] (restricted)
Alan Manning, 2000. "Labour Supply, Search and Taxes," CEP Discussion Papers dp0449, Centre for Economic Performance, LSE. [Downloadable!]
Other versions:
- Manning, Alan, 2001. "Labour supply, search and taxes," Journal of Public Economics, Elsevier, vol. 80(3), pages 409-434, June. [Downloadable!] (restricted)
Krueger, Alan B. & Mueller, Andreas, 2008. "The Lot of the Unemployed: A Time Use Perspective," IZA Discussion Papers 3490, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Alan B. Krueger & Andreas Mueller, 2008. "The Lot of the Unemployed: A Time Use Perspective," Working Papers 1062, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
Lindbeck, Assar, 1997. "Incentives in the Welfare State," Seminar Papers 604, Stockholm University, Institute for International Economic Studies. [Downloadable!]
Other versions:
- Assar Lindbeck, 1996. "Incentives in the Welfare-State," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich.
Krueger, Alan B. & Mueller, Andreas, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," IZA Discussion Papers 3667, Institute for the Study of Labor (IZA). [Downloadable!]
Other versions:
- Alan B. Krueger & Andreas Mueller, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," Working Papers 1093, Princeton University, Department of Economics, Center for Economic Policy Studies.. [Downloadable!]
- Alan B. Krueger & Andreas Mueller, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," Working Papers 1070, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
Ljungqvist, Lars & Sargent, Thomas J, 2002. "The European Employment Experience," CEPR Discussion Papers 3543, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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