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Re-entitlement Effects with Duration Dependent Unemployment Insurance in a Stochastic Matching Equilibrium

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  • Melvyn Coles
  • Adrian Masters

    () (State University of New York Albany)

Abstract

In the context of a standard equilibrium matching framework, this paper considers how a duration dependent unemployment insurance (UI) system affects the dynamics of unemployment and wages in an economy subject to stochastic job-destruction shocks. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle

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File URL: http://repec.org/sed2006/up.22661.1138986654.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 189.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:189

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Keywords: Matching frictions; Unemployment; Duration Dependent UI.;

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
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  10. Adrian Masters & Melvyn Coles, 2004. "Optimal Unemployment Insurance in a Matching Equilibrium," Discussion Papers 04-12, University at Albany, SUNY, Department of Economics.
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Cited by:
  1. James S. Costain & Michael Reiter, 2003. "Business Cycles, Unemployment Insurance, and the Calibration of Matching Models," CESifo Working Paper Series 1008, CESifo Group Munich.
  2. Min Zhang, 2010. "Unemployment Insurance Eligibility, Moral Hazard and Equilibrium Unemployment," Working Papers tecipa-405, University of Toronto, Department of Economics.
  3. Andersen, Torben M & Svarer, Michael, 2010. "Business Cycle Dependent Unemployment Insurance," IZA Discussion Papers 5196, Institute for the Study of Labor (IZA).
  4. Andrey Launov & Klaus Wälde, 2010. "Estimating Incentive and Welfare Effects of Non-stationary Unemployment Benefits," SOEPpapers on Multidisciplinary Panel Data Research 328, DIW Berlin, The German Socio-Economic Panel (SOEP).
  5. Miquel Faig, 2008. "Labor Market Cycles and Unemployment Insurance Eligibility," 2008 Meeting Papers 183, Society for Economic Dynamics.

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