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General Equilibrium Effects of Unemployment Compensation with Labor Force Participation

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  • Michael Sattinger

Abstract

This article examines the effects of unemployment compensation when the size of the labor force depends on unemployment benefits. The analysis is based on an aggregate model with search and matching in which unemployment compensation affects the wage determination process and the number of jobs and workers. As with partial equilibrium models, unemployment compensation raises the unemployment rate and the ratio of unemployed to vacancies. However, wages may go up or down and firms may be better-off. Generally, employed workers are worse-off. Unemployment compensation transfers income from employed factors to unemployed factors, leading to greater input levels. Copyright 1995 by University of Chicago Press.
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Suggested Citation

  • Michael Sattinger, 1993. "General Equilibrium Effects of Unemployment Compensation with Labor Force Participation," Discussion Papers 93-03, University at Albany, SUNY, Department of Economics.
    • Handle: RePEc:nya:albaec:93-03
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    References listed on IDEAS

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    1. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
    2. anonymous, 1987. "Review of domestic and external economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 50, march.
    3. James M. Poterba & Lawrence H. Summers, 1993. "Unemployment Benefits, Labor Market Transitions, and Spurious Flows: A Multinational Logit Model with Errors in Classification," NBER Working Papers 4434, National Bureau of Economic Research, Inc.
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    5. -, 1987. "Evolución de la economía brasileña, 1987," Informe Estadístico – Oficina de la CEPAL en Brasilia 27977, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. N/A, 1987. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 119(1), pages 6-23, February.
    7. Axell, Bo & Lang, Harald, 1990. " The Effects of Unemployment Compensation in General Equilibrium with Search Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(4), pages 531-540.
    8. N/A, 1987. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 120(1), pages 6-20, May.
    9. N/A, 1987. "Chapter I. the Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 122(1), pages 7-23, November.
    10. N/A, 1987. "Chapter I. the Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 121(1), pages 6-20, August.
    11. anonymous, 1987. "New Zealand economic chronology 1986," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 50, march.
    12. Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 333-343, July.
    13. Hamermesh, Daniel S, 1979. "Entitlement Effects, Unemployment Insurance and Employment Decisions," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 317-332, July.
    14. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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    Citations

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    Cited by:

    1. Sattinger, Michael, 2001. "A Kaldor Matching Model of Real Wage Declines," IZA Discussion Papers 380, Institute of Labor Economics (IZA).
    2. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, June.
    3. Chen, Been-Lon & Hsu, Mei & Lai, Chih-Fang, 2016. "Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 273-292.
    4. Garibaldi, Pietro & Wasmer, Etienne, 2001. "Labor Market Flows and Equilibrium Search Unemployment," IZA Discussion Papers 406, Institute of Labor Economics (IZA).
    5. repec:hal:spmain:info:hdl:2441/8921 is not listed on IDEAS
    6. Michael Sattinger, 2002. "A Queuing Model of the Market for Access to Trading Partners," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 533-548, May.
    7. repec:hal:wpspec:info:hdl:2441/8921 is not listed on IDEAS
    8. Mário Centeno & Márcio Corrêa, 2006. "Job Matching, Unexpected Obligations And Retirement Decisions," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 159, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    9. Falk, Armin & Huffman, David B. & Sunde, Uwe, 2006. "Do I Have What It Takes? Equilibrium Search with Type Uncertainty and Non-Participation," IZA Discussion Papers 2531, Institute of Labor Economics (IZA).
    10. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation and Labor Market Flows," SciencePo Working papers hal-01020784, HAL.
    11. repec:spo:wpecon:info:hdl:2441/8921 is not listed on IDEAS

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    Keywords

    Unemployment;

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