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Firm Productivity Dispersion and the Matching Role of UI Policy

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Author Info

  • Blumkin, Tomer

    ()
    (Ben Gurion University)

  • Hadar, Yossi

    ()
    (Ben Gurion University)

  • Yashiv, Eran

    ()
    (Tel Aviv University)

Abstract

This paper studies optimal UI policy from the perspective of worker assignment to heterogenous jobs in an environment of random matching. Workers react to UI policy through job acceptance decisions; firms react to UI policy through wage posting. There is endogenous assortative matching as a result of the fact that UI policy induces a time profile for reservation wages, shifting the labor force towards the more productive firms. The relation between productivity dispersion and UI policy is mediated by the wage posting policies of firms that take both productivity and policy into account. Optimal UI policy is shown to crucially depend on the properties of the firm productivity distribution, such as its variance and skewness.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1733.

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Length: 44 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1733

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Related research

Keywords: productivity; heterogeneity; UI policy; endogenous assortative matching; search;

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References

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  1. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  2. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High Wage Workers and High Wage Firms," NBER Working Papers 4917, National Bureau of Economic Research, Inc.
  3. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  4. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
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  7. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
  8. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  10. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, vol. 10(3), pages 403-425, December.
  11. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  13. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  14. Moen, Espen R, 2002. "Do Good Workers Hurt Bad Workers - or is it the Other Way Around?," CEPR Discussion Papers 3471, C.E.P.R. Discussion Papers.
  15. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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Cited by:
  1. Tomer Blumkin & Efraim Sadka, 2010. "Rising UI benefits over time," International Tax and Public Finance, Springer, vol. 17(5), pages 501-517, October.

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