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Heterogeneous Labor Markets and the Generosity Towards the Unemployed: An International Perspective

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Abstract

In this paper, we investigate whether the different distributions of European, Canadian and US labor forces may explain their differences in unemployment insurance generosity and attitude towards moral hazard. We do so within a dynamic general equilibrium model with indivisible labor and borrowing constraints. Agents differ in their educational attainment, which translates into country-specific differences in the probabilities of finding a job as well as income prospects. We parametrize the model to a set of European countries, Canada and the United States. We then ask citizens to vote on an unemployment insurance program given a certain level of moral hazard. Les différences dans la distribution des forces de travail en Europe, au Canada et aux USA peuvent-elles expliquer les différences de générosité de l'assurance chômage et d'attitudes vis-à-vis du risque moral? Nous répondons à cette question dans un modèle d'équilibre général dynamique avec indivisibilité du travail et contraintes de liquidités. Les agents diffèrent selon leur niveau d'éducation, ce qui se traduit par des différences dans la probabilité d'emploi et dans le salaire espéré. Nous paramétrisons le modèle pour un ensemble de pays européens, le Canada et les Etats Unis, et demandons aux citoyens de ces pays de se prononcer sur la générosité de l'assurance chômage par vote.

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Bibliographic Info

Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 88.

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Length: 17 pages
Date of creation: Jun 1999
Date of revision:
Handle: RePEc:cre:crefwp:88

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Keywords: Heterogeneous agents; unemployment insurance; voting;

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References

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  1. Corak, Miles Heisz, Andrew, 1995. "The Duration of Unemployment: A User Guide," Analytical Studies Branch Research Paper Series 1995084e, Statistics Canada, Analytical Studies Branch.
  2. Williamson, S. & Wang, C., 1995. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Working Papers 95-09, University of Iowa, Department of Economics.
  3. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  4. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-42, February.
  5. Jacob Mincer, 1991. "Education and Unemployment," NBER Working Papers 3838, National Bureau of Economic Research, Inc.
  6. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  7. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 1998. "Equilibrium unemployment insurance," Economics Working Papers 605, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
  8. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
  9. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Nickell, Stephen, 1979. "Education and Lifetime Patterns of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S117-31, October.
  11. Stephane Pallage & Christian Zimmermann, 1998. "Voting on Unemployment Insurance Generosity," Cahiers de recherche CREFE / CREFE Working Papers 64, CREFE, Université du Québec à Montréal.
  12. Wang, Cheng & Williamson, Steve, 1996. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Staff General Research Papers 5088, Iowa State University, Department of Economics.
  13. Lindbeck, Assar & Snower, Dennis J, 1988. " Job Security, Work Incentives and Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(4), pages 453-74.
  14. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  15. Hassler, John & Rodriguez Mora, Jose V., 1999. "Employment turnover and the public allocation of unemployment insurance," Journal of Public Economics, Elsevier, vol. 73(1), pages 55-83, July.
  16. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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Cited by:
  1. Hassler, John & Mora, José & Storesletten, Kjetil & Zilibotti, Fabrizio, 1999. "Equilibrium Unemployment Insurance," Seminar Papers 665, Stockholm University, Institute for International Economic Studies.
  2. Stephane Pallage & Christian Zimmermann, 2004. "On Voters' Attitudes Towards Unemployment Insurance Subsidies across Regions: A Canadian Simulation," Working papers 2004-34, University of Connecticut, Department of Economics.
  3. Pollak, Andreas, 2007. "Optimal unemployment insurance with heterogeneous agents," European Economic Review, Elsevier, vol. 51(8), pages 2029-2053, November.

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