Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?
This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2005.
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Volume (Year): 6 (2005)
Issue (Month): 4 (November)
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