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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0002.
Date of creation: 2000
Date of revision:
Contact details of provider:
Web page: http://www.feweb.vu.nl
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, R.J.M. & Bloemen, H.G., 2000. "Premium Differentiation in the Unemployment Insurance System and the Demand for Labor," Discussion Paper 2000-11, Tilburg University, Center for Economic Research.
- 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, Vacancies, and Immigrant Workers - - - General
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blanchflower, David G & Oswald, Andrew J, 1994. "Estimating a Wage Curve for Britain: 1973-90," Economic Journal, Royal Economic Society, vol. 104(426), pages 1025-43, September.
- Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
- Holmlund, Bertil & Zetterberg, Johnny, 1991.
"Insider effects in wage determination : Evidence from five countries,"
European Economic Review,
Elsevier, vol. 35(5), pages 1009-1034, July.
- Holmlund, B. & Zetterberg, J., 1989. "Insider Effects In Wage Determination: Evidence From Five Countries," Papers 1989a, Uppsala - Working Paper Series.
- Bertola, Giuseppe & Caballero, Ricardo J, 1994.
"Cross-Sectional Efficiency and Labour Hoarding in a Matching Model of Unemployment,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(3), pages 435-56, July.
- Giuseppe Bertola & Ricardo J. Caballero, 1993. "Cross Sectional Efficiency and Labor Hoarding in an Matching Model of Unemployment," NBER Working Papers 4472, National Bureau of Economic Research, Inc.
- Mortensen, Dale T & Pissarides, Christopher A, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(3), pages 397-415, July.
- 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.
- Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
- Burda, Michael C., 1991. "Monopolistic competition, costs of adjustment, and the behavior of European manufacturing employment," European Economic Review, Elsevier, vol. 35(1), pages 61-79, January.
- Topel, Robert H, 1983. "On Layoffs and Unemployment Insurance," American Economic Review, American Economic Association, vol. 73(4), pages 541-59, September.
- Graafland, J.J. & Huizinga, F.H., 1998. "Taxes and benefits in a non-linear wage equation," MPRA Paper 21076, University Library of Munich, Germany.
- Ruud de Mooij, 2004. "Towards efficient unemployment insurance in the Netherlands," CPB Memorandum 100, CPB Netherlands Bureau for Economic Policy Analysis.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (R. Dam).
If references are entirely missing, you can add them using this form.