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Time Limits in a Two-tier Unemployment Benefit Scheme under Involuntary Unemployment

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  • Christian Holzner
  • Volker Meier

    ()

  • Martin Werding

Abstract

The consequences of introducing or tightening time limits on receiving high unemploymentbenefits are studied in a shirking model. Stricter time limits have an ambiguousimpact on the net wage, and changes of utility levels of employed workers and recipientsof high unemployment benefits have the same sign as the variation in the netwage. The utility differential between the two groups of unemployed shrinks. The relativeincome position of skilled workers moves in the same direction as the net wage ofunskilled workers. When access to high benefits is denied for caught shirkers, strictertime limits may decrease employment.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Papers No. 29.

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Date of creation: 2006
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Handle: RePEc:ces:ifowps:_29

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Keywords: Unemployment benefits; welfare benefits; time limits; efficiency wages.;

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  1. Williamson, S. & Wang, C., 1995. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Working Papers 95-09, University of Iowa, Department of Economics.
  2. James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
  3. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
  4. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  5. Wang, Cheng & Williamson, Stephen D., 2002. "Moral Hazard, Optimal Unemployment Insurance and Experience Rating," Staff General Research Papers 10133, Iowa State University, Department of Economics.
  6. Fredriksson, P. & Holmlund, B., 1998. "Optimal Unemployment Insurance in Search Equilibrium," Papers 1998-2, Uppsala - Working Paper Series.
  7. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-62, December.
  8. John Hassler & José V. Rodriguez Mora, 2002. "Should UI Benefits Really Fall over Time?," CESifo Working Paper Series 804, CESifo Group Munich.
  9. Cahuc, Pierre & Lehmann, Etienne, 2000. "Should unemployment benefits decrease with the unemployment spell?," Journal of Public Economics, Elsevier, vol. 77(1), pages 135-153, July.
  10. Arulampalam, Wiji & Stewart, Mark B, 1995. "The Determinants of Individual Unemployment Durations in an Era of High Unemployment," Economic Journal, Royal Economic Society, vol. 105(429), pages 321-32, March.
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