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Employment And Welfare Effects Of A Two-Tier Unemployment Compensation System

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  • Burkhard Heer

    (University of Munich)

Abstract

In many OECD countries, e.g. in Germany, France, or the UK, unemployment compensation consists of unemployment insurance and unemployment assis-tance. Unemployment assistance is provided subsequent to the expiration of entitlement to unemployment insurance and is lower. The e«ects of this two-tier unemployment compensation system are studied in a general equi-librium job search model with endogenous distributions of income, wealth, and employment which is calibrated with regard to the characteristics of the German economy. Our results are as follows: i) employment is a decreas-ing function of both unemployment insurance and unemployment assistance. ii) Savings are (not) a monotone increasing function of unemployment in-surance (unemployment assistance payments). iii) Optimal unemployment compensation payments are found to be a decreasing function over time.

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2000 with number 3.

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Date of creation: 05 Jul 2000
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Handle: RePEc:sce:scecf0:3

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Postal: CEF 2000, Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25,27, 08005, Barcelona, Spain
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  1. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
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Cited by:
  1. 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.
  2. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
  3. Milan Vodopevic, 2004. "Comparing Unemployment Insurance and Unemployment Assistance," World Bank Other Operational Studies 11811, The World Bank.
  4. Burkhard Heer & Albrecht Morgenstern, 2005. "The Labor Market Effects of Indexing Unemployment Benefits to Previous Earnings," Public Finance Review, , vol. 33(3), pages 385-402, May.
  5. Heer, Burkhard & Trede, Mark, 2003. "Efficiency and distribution effects of a revenue-neutral income tax reform," Journal of Macroeconomics, Elsevier, vol. 25(1), pages 87-107, March.
  6. Hassler, John & Rodriguez Mora, José V., 2002. "Should UI Benefits Really Fall Over Time?," IZA Discussion Papers 622, Institute for the Study of Labor (IZA).
  7. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection Discussion Papers 25529, The World Bank.
  8. Andreas Pollak, 2005. "Optimal Unemployment Insurance in a Search Model with Variable Human Capital," Computing in Economics and Finance 2005 324, Society for Computational Economics.
  9. Pollak, Andreas, 2007. "Optimal unemployment insurance with heterogeneous agents," European Economic Review, Elsevier, vol. 51(8), pages 2029-2053, November.
  10. Andreas Pollak, 2005. "Optimal Unemployment Insurance and Voting," Computational Economics 0505002, EconWPA.

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