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Part-Time Unemployment and Optimal Unemployment Insurance

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  • Ek Spector, Susanne

    ()
    (Confederation of Swedish Enterprise)

  • Holmlund, Bertil

    ()
    (Uppsala University)

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 full-time employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate non-negligible 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5540.

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Length: 32 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5540

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Keywords: job search; part-time unemployment; unemployment insurance;

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  1. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers, Society for Economic Dynamics 460, Society for Economic Dynamics.
  2. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2009. "The Effect of Receiving Supplementary UI Benefits on Unemployment Duration," Working Papers, University of Aarhus, Aarhus School of Business, Department of Economics 09-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  3. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
  4. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 50-65, March.
  5. Christopher Pissarides, 2007. "The unemployment volatility puzzle: is wage stickiness the answer?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4460, London School of Economics and Political Science, LSE Library.
  6. Tomi Kyyrä, 2008. "Partial Unemployment Insurance Benefits and the Transition Rate to Regular Work," Discussion Papers, Government Institute for Economic Research Finland (VATT) 440, Government Institute for Economic Research Finland (VATT).
  7. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  8. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series, Uppsala University, Department of Economics 1998:2, Uppsala University, Department of Economics.
  9. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
  10. 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.
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Cited by:
  1. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2013. "The effect of receiving supplementary UI benefits on unemployment duration," Labour Economics, Elsevier, Elsevier, vol. 21(C), pages 122-133.
  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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