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Social Preferences and Labor Market Policy

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Author Info

  • Filges, Trine

    (Department of Economics, Copenhagen Business School)

  • Kennes, John

    (Department of Economics, Copenhagen Business School)

  • Larsen, Birthe

    (Department of Economics, Copenhagen Business School)

  • Tranæs, Torben

    (Department of Economics, Copenhagen Business School)

Abstract

We find that the main featues of labor policy across OECD countries can be explained by a simple general equilibrium search model with risk neutral agents and a government that chooses policy to maximize a social welfare function. In equilibrum, policies are chosen to optimal redistribute income from advantaged to disadvantaged workers. A worker can be disadvantaged in the sense that they may have less ability to aquire and utilize skills in the workplace. The model explains why passive benefits tend to fall and active benefits tend to increase during the course of unemployment spell. The model also explains why countries that appear to pursue equity spend more on both active and passive labor market programs.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7648
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Bibliographic Info

Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 13-2006.

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Length: 30 pages
Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:hhs:cbsnow:2006_013

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Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Email:
Web page: http://www.cbs.dk/departments/econ/
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  1. Michael T. Kiley, 2003. "How should unemployment benefits respond to the business cycle?," Finance and Economics Discussion Series 2003-01, Board of Governors of the Federal Reserve System (U.S.).
  2. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving incentives in unemployment insurance: A review of recent research," Working Paper Series 2003:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. Nicola Pavoni & Giovanni L. Violante, 2005. "Optimal welfare-to-work programs," Discussion Paper / Institute for Empirical Macroeconomics 143, Federal Reserve Bank of Minneapolis.
  4. Julien, B. & Kennes, J. & King, I., 1998. "Bidding for Labour," Working Papers dp98-03, CRABE, Department of Economics, Simon Fraser University.
  5. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
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