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The Determination of Unemployment Benefits

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Author Info
Rafael Di Tella (Harvard Business School)
Robert J. MacCulloch (London School of Economics)

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Abstract

While much empirical research exists on labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. We present a simple model where workers desire insurance against unemployment risk and benefits increase the unemployment rate. We then conduct one of the first empirical analyses of the determinants of the parameters of the benefit system. Using data for developed countries for 197189, controlling for year and country fixed effects and the government's political color, we find evidence that the level of benefits falls when the unemployment rate is high. This is consistent with Wright's tax effect.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 20 (2002)
Issue (Month): 2 (Part)
Pages: 404-403
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Handle: RePEc:ucp:jlabec:v:20:y:2002:i:2:p:404-403

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  1. Holmlund, Bertil, 1997. "Unemployment Insurance in Theory and Practice," Working Paper Series 1997:25, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. repec:bep:capsoc:2:2007:1:1 is not listed on IDEAS
  3. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics. [Downloadable!]
  4. Andreas Kuhn, 2009. "In the Eye of the Beholder: Subjective Inequality Measures and the Demand for Redistribution," NRN working papers 2009-14, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria. [Downloadable!]
  5. Hassler, John & Mora, José & Storesletten, Kjetil & Zilibotti, Fabrizio, 1999. "Equilibrium Unemployment Insurance," Seminar Papers 665, Stockholm University, Institute for International Economic Studies. [Downloadable!]
    Other versions:
  6. Di Tella, Rafael & MacCulloch, Robert J. & Oswald, Andrew J., 2001. "The Macroeconomics of Happiness," The Warwick Economics Research Paper Series (TWERPS) 615, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  7. Laszlo Goerke & Markus Pannenberg & Heinrich W. Ursprung, 2007. "A Positive Theory of the Earnings Relationship of Unemployment Benefits," IZA Discussion Papers 3003, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Blanchard, Olivier & Katz, Lawrence F, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter. [Downloadable!] (restricted)
    Other versions:
  9. Robert MacCulloch, 2001. "Does Social Insurance Help Secure Property Rights?," STICERD - Development Economics Papers 31, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  10. Rafael Di Tella & Robert MacCulloch, 2005. "Gross National Happiness as an Answer to the Easterlin Paradox?," Macroeconomics 0504027, EconWPA. [Downloadable!]
    Other versions:
  11. Andreas Kuhn, 2009. "In the eye of the beholder: subjective inequality measures and the demand for redistribution," IEW - Working Papers iewwp425, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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