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Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium

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  • Coles, Melvyn
  • Masters, Adrian

Abstract

In the context of a standard equilibrium matching framework, this paper considers how a duration dependent unemployment insurance (UI) system affects the dynamics of unemployment and wages in an economy subject to stochastic job-destruction shocks. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle
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  • Coles, Melvyn & Masters, Adrian, 2007. "Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 2879-2898, September.
    • Handle: RePEc:eee:dyncon:v:31:y:2007:i:9:p:2879-2898
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    Citations

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    Cited by:

    1. Luz Adriana Flórez, 2014. "The Efficiency of the Informal Sector on the Search and Matching Framework," Borradores de Economia 11954, Banco de la Republica.
    2. Andersen, Torben M & Svarer, Michael, 2009. "Business Cycle Dependent Unemployment Insurance," CEPR Discussion Papers 7334, C.E.P.R. Discussion Papers.
    3. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
    4. Andrey Launov & Klaus Wälde, 2013. "Estimating Incentive And Welfare Effects Of Nonstationary Unemployment Benefits," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(4), pages 1159-1198, November.
    5. Min Zhang, 2010. "Unemployment Insurance Eligibility, Moral Hazard and Equilibrium Unemployment," Working Papers tecipa-405, University of Toronto, Department of Economics.
    6. Flórez, Luz A., 2017. "Informal sector under saving: A positive analysis of labour market policies," Labour Economics, Elsevier, vol. 44(C), pages 13-26.
    7. Regev, Tali, 2012. "Unemployment compensation under partial program coverage," Labour Economics, Elsevier, vol. 19(6), pages 888-897.
    8. Homa Esfahanian, 2016. "On the Reservation Wages and Liquidity Constraint," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(3), pages 295-304, Summer.
    9. Miquel Faig, 2008. "Labor Market Cycles and Unemployment Insurance Eligibility," 2008 Meeting Papers 183, Society for Economic Dynamics.
    10. Luz Adriana Flórez, 2014. "Optimal Policy with Informal Sector and Endogenous Savings," Borradores de Economia 833, Banco de la Republica de Colombia.

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    More about this item

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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