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Part-Time Unemployment and Optimal Unemployment Insurance

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Author Info

  • Ek, Susanne

    ()
    (Uppsala Center for Labor Studies)

  • Holmlund, Bertil

    ()
    (Uppsala Center for Labor Studies)

Abstract

A significant fraction of the labor force consists of employed workers who are part-time unemployed (underemployed) in the sense that they are unable to work as much as they prefer. This paper develops a search and matching model to study the design of optimal unemployment insurance in an economy with unemployment as well as part-time unemployment. Part-time unemployment provides income insurance and serves as a stepping stone to full-time jobs. Unemployment benefits for part-timers increase the outflow from unemployment to part-time work but reduce the outflow from part-time work to fulltime employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate nonnegligible welfare gains associated with time limits for unemployment benefits as well as for part-time benefits. The welfare gains from optimal UI are larger when wages are fixed than when they are flexible.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Labor Studies with number 2011:2.

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Length: 36 pages
Date of creation: 28 Feb 2011
Date of revision:
Handle: RePEc:hhs:uulswp:2011_002

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: Job search; part-time unemployment; unemployment insurance;

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References

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  1. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  2. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE.
  3. Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
  4. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2009. "The Effect of Receiving Supplementary UI Benefits on Unemployment Duration," Working Papers 09-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  5. Tomi Kyyrä, 2008. "Partial Unemployment Insurance Benefits and the Transition Rate to Regular Work," Discussion Papers 440, Government Institute for Economic Research Finland (VATT).
  6. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
  7. Simon Burgess & Helene Turon, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies – A Comment," Bristol Economics Discussion Papers 05/573, Department of Economics, University of Bristol, UK.
  8. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
  9. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  10. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
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Cited by:
  1. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2009. "The Effect of Receiving Supplementary UI Benefits on Unemployment Duration," Working Papers 09-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  2. Godoy, Anna & Røed, Knut, 2014. "Unemployment Insurance and Underemployment," IZA Discussion Papers 7913, Institute for the Study of Labor (IZA).

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