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Optimal unemployment benefit financing scheme : A transatlantic comparison

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  • Julien Albertini

    ()
    (Centre d’Études des politiques Économiques de l’Université d’Evry (EPEE et TEPP (FR CNRS no 3126)))

  • Xavier Fairise

    ()
    (Centre d’Études des politiques Économiques de l’Université d’Evry (EPEE et TEPP (FR CNRS no 3126)))

Abstract

The aim of this paper is to study the properties of an optimal unemployment benefit financing scheme in the US and in France. We wonder if firms should be taxed in proportion of their layoffs and if such a tax should correspond to a part or all of the fiscal cost induced by a dismissal. The welfare gains generated by reforms of the US and French labor market institutions are evaluated. The US labor market is initially characterized by a flexible dismissal regulation and an experience rating system. We show that making firms more responsible for the cost caused by theirs layoff is welfare enhancing. Concerning the French labor market, we find that a more flexible dismissal regulation combined with an experience rating tax may significantly improve labor market performances. In both cases, the efficient layoff tax is close to the expected fiscal cost of an unemployed worker.

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Bibliographic Info

Paper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 09-01.

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Length: 36 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:eve:wpaper:09-01

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Related research

Keywords: DSGE models; matching; firing tax; experience rating;

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  1. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
  2. Francesco Zanetti, 2007. "Labour market institutions and aggregate fluctuations in a search and matching model," Bank of England working papers 333, Bank of England.
  3. Cahuc, Pierre & Malherbet, Franck, 2002. "Unemployment Compensation Finance and Labour Market Rigidity," CEPR Discussion Papers 3512, C.E.P.R. Discussion Papers.
  4. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  5. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," Departmental Working Papers 200106, Rutgers University, Department of Economics.
  6. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  7. 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.
  8. Cahuc, Pierre & Gianella, Christian & Goux, Dominique & Zylberberg, Andre, 2002. "Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms," IZA Discussion Papers 582, Institute for the Study of Labor (IZA).
  9. Joseph, Gilles & Pierrard, Olivier & Sneessens, Henri R., 2003. "Job Turnover, Unemployment and Labor Market Institutions," IZA Discussion Papers 835, Institute for the Study of Labor (IZA).
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