Advanced Search
MyIDEAS: Login to save this paper or follow this series

Unemployment Compensation and High European Unemployment: A Reassessment with New Benefit Indicators

Contents:

Author Info

  • David R. Howell
  • Miriam Rehm

Abstract

Generous unemployment benefits lie at the heart of the conventional explanation for persistent high unemployment. The effects of benefit generosity are more ambiguous in a broader behavioral framework in which workers get substantial disutility from unemployment controlling for income, and know that unemployment has scarring effects in the future. The micro evidence suggests modest effects of changes in generosity, but there are reasons to doubt that the impacts on national unemployment rates are consequential. The strongest evidence for the orthodox prediction comes from cross-country regressions on the OECD’s gross replacement rate (GRR), but we find little support in the pattern of annual changes in the GRR and the unemployment rate for OECD countries over the last three decades. We take advantage of newly released and much improved net replacement rate indicators from the OECD, which show little correlation with either the GRRs or with unemployment and employment rates. The evidence does not offer compelling support for the view that benefit generosity is at the root of high European unemployment. ��

Download Info

If 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.
File URL: http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_201-250/WP201.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp201.

as in new window
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:uma:periwp:wp201

Contact details of provider:
Postal: 418 N Pleasant St, Amherst MA 01002
Phone: (413) 545-6355
Fax: (413) 545-2921
Email:
Web page: http://www.peri.umass.edu/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. David Card & Raj Chetty & Andrea Weber, 2007. "The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?," NBER Working Papers 12893, National Bureau of Economic Research, Inc.
  2. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series, Research Institute of Industrial Economics 481, Research Institute of Industrial Economics.
  3. Amable, Bruno & Gatti, Donatella & Schumacher, Jan, 2006. "Welfare State Retrenchment: The Partisan Effect Revisited," IZA Discussion Papers 1995, Institute for the Study of Labor (IZA).
  4. Andrew Clark, 2001. "Unemployment As A Social Norm: Psychological Evidence from Panel Data," DELTA Working Papers, DELTA (Ecole normale supérieure) 2001-17, DELTA (Ecole normale supérieure).
  5. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, De Gruyter, vol. 2(1), pages 1-73, May.
  6. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  7. Bart Cockx & Jean Ries, 2004. "The Exhaustion of Unemployment Benefits in Belgium. Does it Enhance the Probability of Employment?," CESifo Working Paper Series 1226, CESifo Group Munich.
  8. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  9. Mário Centeno, 2002. "The Match Quality Gains from Unemployment Insurance," Working Papers, Banco de Portugal, Economics and Research Department w200209, Banco de Portugal, Economics and Research Department.
  10. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
  11. Daniel G. Sullivan & Till von Wachter, 2006. "Mortality, mass-layoffs, and career outcomes: an analysis using administrative data," Working Paper Series, Federal Reserve Bank of Chicago WP-06-21, Federal Reserve Bank of Chicago.
  12. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  13. Rafael Di Tella & Robert J. MacCulloch, 2002. "The Determination of Unemployment Benefits," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 20(2), pages 404-434, Part.
  14. Belot, M.V.K. & Ours, J.C. van, 2001. "Unemployment and labor market institutions: An empirical analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89213, Tilburg University.
  15. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
  16. Tatsiramos, Konstantinos, 2006. "Unemployment Insurance in Europe: Unemployment Duration and Subsequent Employment Stability," IZA Discussion Papers 2280, Institute for the Study of Labor (IZA).
  17. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3023, C.E.P.R. Discussion Papers.
  18. Clark, Andrew E., 2009. "Work, Jobs And Well-Being Across the Millennium," CEPREMAP Working Papers (Docweb) 0901, CEPREMAP.
  19. Stéphane Carcillo & David Grubb, 2006. "From Inactivity to Work: The Role of Active Labour Market Policies," OECD Social, Employment and Migration Working Papers 36, OECD Publishing.
  20. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199279173, October.
  21. Blanchflower, David G. & Oswald, Andrew J., 2001. "Well-Being Over Time in Britain and the USA," The Warwick Economics Research Paper Series (TWERPS) 616, University of Warwick, Department of Economics.
  22. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  23. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," IZA Discussion Papers 492, Institute for the Study of Labor (IZA).
  24. Stephen Rose, 2005. "REVIEW: Fighting Unemployment: The Limits of Free Market Orthodoxy," Challenge, M.E. Sharpe, Inc., vol. 48(5), pages 113-119, October.
  25. Barr, Nicholas, 1992. "Economic Theory and the Welfare State: A Survey and Interpretation," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 741-803, June.
  26. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  27. Pallage, Stéphane & Scruggs, Lyle & Zimmermann, Christian, 2008. "Measuring Unemployment Insurance Generosity," IZA Discussion Papers 3868, Institute for the Study of Labor (IZA).
  28. Michael A. Shields & Stephen Wheatley Price, 2005. "Exploring the economic and social determinants of psychological well-being and perceived social support in England," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 513-537.
  29. Addison, John T. & Blackburn, McKinley L., 2000. "The effects of unemployment insurance on postunemployment earnings," Labour Economics, Elsevier, vol. 7(1), pages 21-53, January.
  30. Richard B. Freeman, 2005. "Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance," NBER Working Papers 11286, National Bureau of Economic Research, Inc.
  31. Petrongolo, Barbara, 2008. "The long-term effects of job search requirements: Evidence from the UK JSA reform," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7067, C.E.P.R. Discussion Papers.
  32. Ljungqvist, Lars & Sargent, Thomas J, 2005. "Jobs and Unemployment in Macroeconomic Theory: A Turbulence Laboratory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5340, C.E.P.R. Discussion Papers.
  33. Andrew Glyn & David Howell & John Schmitt, 2006. "Labor Market Reforms: The Evidence Does Not Tell the Orthodox Tale," Challenge, M.E. Sharpe, Inc., vol. 49(2), pages 5-22, April.
  34. Paul Gregg & Jane Waldfogel, 2005. "Introduction," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(501), pages F1-F6, 02.
  35. Blondal, Sveinbjorn & Pearson, Mark, 1995. "Unemployment and Other Non-employment Benefits," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 136-69, Spring.
  36. Knut Roed & Tao Zhang, 2003. "Does Unemployment Compensation Affect Unemployment Duration?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(484), pages 190-206, January.
  37. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  38. Layard, R. & Bean, C., 1988. "Why Does Unemployment Persist?," Papers, London School of Economics - Centre for Labour Economics 321, London School of Economics - Centre for Labour Economics.
  39. Walter Nicholson & Karen Needels, 2006. "Unemployment Insurance: Strengthening the Relationship between Theory and Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 47-70, Summer.
  40. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
  41. Lawrence Kahn, 2003. "Labour Market Institutions and Unemployment in OECD Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 1(4), pages 25-32, October.
  42. repec:hal:wpaper:halshs-00590537 is not listed on IDEAS
  43. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
  44. Andrew Glyn, 2003. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," Economics Series Working Papers 168, University of Oxford, Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Hur jobbskatteavdraget skapar jobb
    by Roger Mörtvik in Utredarna on 2009-09-22 19:20:12
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(3), pages 545-571, September.
  2. Sachs, Andreas & Schleer, Frauke, 2013. "Labour market performance in OECD countries: A comprehensive empirical modelling approach of institutional interdependencies," ZEW Discussion Papers 13-040, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. David R. Howell, 2010. "Institutions, Aggregate Demand and Cross-Country Employment Performance: Alternative Theoretical Perspectives and the Evidence," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp228, Political Economy Research Institute, University of Massachusetts at Amherst.
  4. Andrés Rodríguez-Pose & Vassilis Tselios, 2011. "Welfare regimes and the incentives to work and get educated," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2011-01, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  5. Goerke, Laszlo & Pannenberg, Markus & Ursprung, Heinrich W., 2007. "A Positive Theory of the Earnings Relationship of Unemployment Benefits," IZA Discussion Papers 3003, Institute for the Study of Labor (IZA).
  6. Simon Sturn, 2011. "Labour market regimes and unemployment in OECD countries," IMK Working Paper 6-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  7. Simon STURN, 2013. "Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries," International Labour Review, International Labour Organization, vol. 152(2), pages 237-254, 06.
  8. Josef C Brada & Marcello Signorelli, 2012. "Comparing Labor Market Performance: Some Stylized Facts and Key Findings," Comparative Economic Studies, Palgrave Macmillan, vol. 54(2), pages 231-250, June.
  9. Altman, Morris, 2014. "Insights from behavioral economics on how labor markets work," Working Paper Series, Victoria University of Wellington, School of Economics and Finance 3466, Victoria University of Wellington, School of Economics and Finance.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:uma:periwp:wp201. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Judy Fogg).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.