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Bismarck versus Beveridge: Flat- and earnings-related unemployment insurance in an efficiency wage framework

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  • Goerke, Laszlo

Abstract

A higher unemployment compensation increases the incentive to shirk in efficiency wage models. If there is a stronger dependence of unemployment benefits on current earnings, these incentives will be reduced. An unemployment insurance with earnings-related benefits is thus characterised by higher employment than one with flat-rate benefits. It is investigated under which conditions this advantage persists in the longer term when financial constraints such as an ex-post constant level of benefits, a cash hmit or a balanced budget rule apply, or when firms are constrained to zero profits. --

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Bibliographic Info

Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series 1 with number 291.

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Date of creation: 1998
Date of revision:
Handle: RePEc:zbw:kondp1:291

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Related research

Keywords: balanced budget; cash limit; earnings-related benefits; efficiency wages; flat-rate benefits; long-run; unemployment insurance;

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References

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  1. Hey, John D. & Mavromaras, Kostas Gr., 1981. "The effect of unemployment insurance on the riskiness of occupational choice," Journal of Public Economics, Elsevier, vol. 16(3), pages 317-341, December.
  2. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  3. Leslie, Derek, 1985. "The Economics of Cash Limits as a Method of Pay Determination," Economic Journal, Royal Economic Society, vol. 95(379), pages 662-78, September.
  4. Goerke, Laszlo, 1997. "An Open Shop, Wage Bargaining, and Taxation--A Note," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 651-57, October.
  5. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  6. Winter-Ebmer, Rudolf, 1996. "Potential Unemployment Benefit Duration and Spell Length: Lessons from a Quasi-experiment in Austria," CEPR Discussion Papers 1534, C.E.P.R. Discussion Papers.
  7. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
  8. Pisauro, Giuseppe, 1991. "The effect of taxes on labour in efficiency wage models," Journal of Public Economics, Elsevier, vol. 46(3), pages 329-345, December.
  9. Michael Hoel, 1990. "Efficiency wages and income taxes," Journal of Economics, Springer, vol. 51(1), pages 89-99, February.
  10. Holmlund, Bertil & Lundborg, Per, 1999. "Wage bargaining, union membership, and the organization of unemployment insurance," Labour Economics, Elsevier, vol. 6(3), pages 397-415, September.
  11. Agell, Jonas & Lundborg, Per, 1992. "Fair wages, involuntary unemployment and tax policies in the simple general equilibrium model," Journal of Public Economics, Elsevier, vol. 47(3), pages 299-320, April.
  12. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.
  13. 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.
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Citations

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Cited by:
  1. Beissinger, Thomas & Büsse, Oliver, 2002. "The Impact of the Unemployment Benefit System on International Spillover Effects," University of Regensburg Working Papers in Business, Economics and Management Information Systems 376, University of Regensburg, Department of Economics.
  2. Thomas Beissinger & Oliver Büsse, 2001. "Bismarck versus Beveridge: Which Unemployment Compensation System is more Prone to Labor Market Shocks?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 78-, December.
  3. Pia Weiss, 2001. "How to Finance Unemployment Benefits in an Economy with Search Generated Equilibrium Unemployment," Public Economics 0103001, EconWPA.

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