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Unemployment Compensation Finance and Aggregate Employment Fluctuations

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  • Olivier L'Haridon

    (Crest)

  • Franck Malherbet

    (Crest)

Abstract

Experience rating which is often treated as a simple adjustment cost is an original feature of the US unemployment benefit system. This Paper extensively addresses the effect of experience rating as an alternative to standard job protection. We provide a simple matching model of unemployment that handles both idiosyncratic and aggregate shocks. In such a framework, we show that experience rating tends to increase labour market performances. Indeed, moving toward an experience rated system tends to stabilize employment. Additionally, for reasonable parameter values average employment and production are increased over the cycle. Therefore, it may be worthwhile to shift standard job protection measures toward a more experience rated system.

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2002-48.

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Date of creation: 2002
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Handle: RePEc:crs:wpaper:2002-48

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  1. Ours, J. C. van & Pfann, G. & Ridder, G., 1993. "Labour Demand and Equilibrium Wage Formation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153299, Tilburg University.
  2. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  3. Katherine Baicker & Claudia Goldin & Lawrence F. Katz, 1998. "A Distinctive System: Origins and Impact of U.S. Unemployment Compensation," NBER Chapters, in: The Defining Moment: The Great Depression and the American Economy in the Twentieth Century, pages 227-264 National Bureau of Economic Research, Inc.
  4. Margolis, D. & Fougere, D., 1999. "Moduler les cotisations employeurs a l'assurance - chomage: les experiences de bonus - malus aux Etats-Unis," Papiers d'Economie Mathématique et Applications 1999.22, Université Panthéon-Sorbonne (Paris 1).
  5. Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November.
  6. Olivier L'Haridon & Franck Malherbet, 2001. "Job Protection and Aggregate Employment Fluctuations : A Reappraisal," Working Papers 2001-36, Centre de Recherche en Economie et Statistique.
  7. Dale Mortensen & Christopher Pissarides, 1992. "The Cyclical Behavior of Job Creation and Job Destruction," Discussion Papers 982, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Pierre Cahuc & André Zylberberg, 1999. "Job Protection, Minimum Wage and Unemployment," Working Papers 99-38, Centre de Recherche en Economie et Statistique.
  9. Cahuc, Pierre & Malherbet, Franck, 2002. "Unemployment Compensation Finance and Labour Market Rigidity," CEPR Discussion Papers 3512, C.E.P.R. Discussion Papers.
  10. Harold L. Cole & Richard Rogerson, 1996. "Can the Mortonson-Pissarides matching model match the business cycle facts?," Staff Report 224, Federal Reserve Bank of Minneapolis.
  11. Rocheteau, Guillaume, 1999. "Balanced-Budget Rules and Indeterminacy of the Equilibrium Unemployment Rate," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 399-409, July.
  12. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  13. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-41, March.
  14. repec:fth:inseep:9938 is not listed on IDEAS
  15. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  16. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-57, October.
  17. David Card & Phillip B. Levine, 1992. "Unemployment Insurance Taxes and the Cyclical and Seasonal Properties of Unemployment," NBER Working Papers 4030, National Bureau of Economic Research, Inc.
  18. Pierre Cahuc & Franck Malherbet, 2001. "Unemployment Compensation Finance and Labor Market Rigidity," Working Papers 2001-37, Centre de Recherche en Economie et Statistique.
  19. Olivier L'Haridon & Franck Malherbet, 2001. "Job Protection and Aggregate Employment Fluctuations : A Reappraisal," Working Papers 2001-36, Centre de Recherche en Economie et Statistique.
  20. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
  21. Christiano, Lawrence J, 1990. "Solving the Stochastic Growth Model by Linear-Quadratic Approximation and by Value-Function Iteration," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 23-26, January.
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Cited by:
  1. Breiding, Torsten, 2006. "Die Arbeitslosenversicherung in Deutschland – Beitrag zur Bekämpfung oder Ursache von Arbeitslosigkeit
    [The unemployment insurance in Germany - does it cause or does it help to overcome unemploy
    ," MPRA Paper 20999, University Library of Munich, Germany.

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