Social Preferences and Labor Market Policy
AbstractWe find that the main featues of labor policy across OECD countries can be explained by an equilibrium search model with risk neutral agents and a government that chooses policy to maximize a social welfare function. Optimal policy redistributes income from advantaged to disadvantaged workers. A worker can be disadvantaged in one of two possible ways - they may have less ability to aquire and utilize skills in the workplace or they may have less ability to enjoy leaisure (i.e. home production). The government does not directly observe these attributes, but must infer them from labor market outcomes. The optimal policy is a solution to an incentive compatibility problem, because each worker has some influence over their labor market state. The model explains why passive benefits tend to fall and active benefits tend to increase durng the course of unemployment spell. The model also explains why countries that appear to pursue equity spend more on both active and passive labor market programs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 562.
Date of creation: 03 Dec 2006
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
competitive search; optimal policy;
Other versions of this item:
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicola Pavoni & G. L. Violante, 2007.
"Optimal Welfare-to-Work Programs,"
Review of Economic Studies,
Oxford University Press, vol. 74(1), pages 283-318.
- Pavoni, Nicola & Violante, Giovanni L, 2006. "Optimal Welfare-to-Work Programs," CEPR Discussion Papers 5937, C.E.P.R. Discussion Papers.
- Nicola Pavoni & Giovanni L. Violante, 2005. "Optimal welfare-to-work programs," Discussion Paper / Institute for Empirical Macroeconomics 143, Federal Reserve Bank of Minneapolis.
- Fredriksson, Peter & Holmlund, Bertil, 2003.
"Improving Incentives in Unemployment Insurance: A Review of Recent Research,"
Working Paper Series
2003:10, Uppsala University, Department of Economics.
- Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
- Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving incentives in unemployment insurance: A review of recent research," Working Paper Series 2003:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
- Julien, B. & Kennes, J. & King, I., 1998.
"Bidding for Labour,"
dp98-03, Department of Economics, Simon Fraser University.
- Kiley Michael T., 2003.
"How Should Unemployment Benefits Respond to the Business Cycle?,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 3(1), pages 1-22, July.
- Michael Kiley, 2002. "How Should Unemployment Benefits Respond to the Business Cycle?," Computing in Economics and Finance 2002 167, Society for Computational Economics.
- Michael T. Kiley, 2003. "How should unemployment benefits respond to the business cycle?," Finance and Economics Discussion Series 2003-01, Board of Governors of the Federal Reserve System (U.S.).
- Robert Shimer, 2005.
"The Assignment of Workers to Jobs in an Economy with Coordination Frictions,"
Journal of Political Economy,
University of Chicago Press, vol. 113(5), pages 996-1025, October.
- Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.