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Family Job Search, Wage Bargainings, and Optimal Unemployment Insurance

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  • Susanne Ek
  • Bertil Holmlund

Abstract

The paper develops an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matter for wage outcomes. In general, employed members of two-person families receive higher wages than employed singles. The model is applied to a welfare analysis of alternative unemployment insurance systems, recognizing the role of spousal employment as a partial substitute for public insurance. The optimal system involves benefit differentiation based on marital status as well as spousal labor market status. Optimal differentiation yields small welfare gains but gives rise to large wage differentials.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2920.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2920

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Keywords: job search; wage bargaining; wage differentials; unemployment; unemployment insurance;

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References

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  1. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
  2. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
  3. Guler, Bulent & Guvenen, Fatih & Violante, Giovanni L., 2012. "Joint-search theory: New opportunities and new frictions," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(4), pages 352-369.
  4. Sanders Korenman & David Neumark, 1991. "Does Marriage Really Make Men More Productive?," Journal of Human Resources, University of Wisconsin Press, vol. 26(2), pages 282-307.
  5. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 546-72, July.
  6. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, Elsevier, vol. 75(3), pages 341-364, March.
  7. Ek, Susanne & Holmlund, Bertil, 2010. "Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2010:1, Uppsala University, Department of Economics.
  8. Laszlo Goerke, 2000. "Bismarck versus Beveridge. Flat-Rate and Earnings-Related Unemployment Insurance in a General Efficiency Wage Framework," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 57(3), pages 243-, May.
  9. Robert E. Hall & Paul R. Milgrom, 2005. "The Limited Influence of Unemployment on the Wage Bargain," NBER Working Papers 11245, National Bureau of Economic Research, Inc.
  10. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  11. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, American Economic Association, vol. 87(1), pages 192-205, March.
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Cited by:
  1. Ek Spector, Susanne & Holmlund, Bertil, 2010. "Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance," IZA Discussion Papers 4701, Institute for the Study of Labor (IZA).
  2. Anders, Forslund & Fredriksson, Peter, 2009. "Income support systems, labour supply incentives and employment – some cross-country evidence," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2010:3, Uppsala University, Department of Economics.
  3. Malmberg, Jonas, 2010. "Posting Post Laval International and National Responses," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2010:5, Uppsala University, Department of Economics.

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