Premium Differentiation in the Unemployment Insurance System and the Demand for Labor
AbstractIn this study we investigate the effect of the introduction of premium differentiation (experience rating) in the Dutch Unemployment Insurance system on the demand for labor. We formulate a model of labor demand, based on the model by Bentolila and Bertola (1990), in which we distinguish two types of workers: the "young" and the "old". This distinction is made, as one of the major motives for opening the discussion around premium differentiation in the Netherlands is the wish to reduce the inflow of older workers into unemployment. In the model, labor adjustment costs (hiring and firing costs) are linear. The model allows for uncertainty in the business cycle. Premium differentiation is incorporated in the model as a rise in firing costs, accompanied by a decrease in unemployment insurance premium payments. Values for the model parameters are determined to quantify the effect of premium differentiation on the demand for labor in various sectors of the Dutch economy. We compute the effect of premium differentiation on the steady state level of labor demand. We also compute the effect of premium differentiation on the level of profits.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-11.
Date of creation: 2000
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Unemployment Insurance; premium differentiation; labor demand;
Other versions of this item:
- Rob Alessie & Hans Bloemen, 2004. "Premium differentiation in the Unemployment Insurance system and the demand for labor," Journal of Population Economics, Springer, vol. 17(4), pages 729-765, December.
- Alessie, Rob & Bloemen, Hans, 2000. "Premium differentiation in the unemployment insurance system and the demand for labor," Serie Research Memoranda 0002, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Rob J.M. Alessie & Hans Bloemen, 2000. "Premium Differentiation in the Unemployment Insurance System and the Demand for Labor," Tinbergen Institute Discussion Papers 00-020/3, Tinbergen Institute.
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
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