Should unemployment benefits decrease with unemployment spell ?
AbstractIn this paper, we investigate whether unemployment benefits should decrease with the unemployment spell in a model where both job search intensity and wages are endogenous. Wages are set by collective agreements bargained by insiders. It is shown that a more declining time sequence of unemployment benefits leads to wage increases when the tax rate is given. Such an effect may imply an increase in unemployment and counteracts the response of job search intensity that can be found in standard job search models with a given wage distribution. Calibration exercises suggest that it costs twice more in terms of welfare loss for the long-term unemployed workers to reduce the unemployment rate of one percent when wages are endogenous than in the standard job search model.
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Bibliographic InfoPaper provided by CEPREMAP in its series CEPREMAP Working Papers (Couverture Orange) with number 9916.
Length: 19 pages
Date of creation: 1999
Date of revision:
Find related papers by JEL classification:
- H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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- NEP-ALL-1999-11-08 (All new papers)
- NEP-DGE-1999-11-08 (Dynamic General Equilibrium)
- NEP-LAB-1999-11-08 (Labour Economics)
- NEP-PBE-1999-11-08 (Public Economics)
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