Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?
AbstractThis paper explores how the introduction of an experience rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience rated systems of unemployment insurance may reduce long term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that, despite the higher costs of layoffs, the introduction of experience rating may increase long term employment. Moreover, it unambiguously increases welfare.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 663.
Date of creation: 2002
Date of revision:
unemployment insurance; labour markets; implicit contracts;
Other versions of this item:
- Julia Fath & Clemens Fuest, 2005. "Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?," German Economic Review, Verein für Socialpolitik, vol. 6(4), pages 471-483, November.
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