IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

On the extent of re-entitlement effects in unemployment compensation

  • Ortega, Javier
  • Rioux, Laurence

We analyze the implications of two-tier unemployment compensation systems with non-automatic eligibility in an equilibrium matching model with Nash bargaining. As eligibility for UI does not automatically follow from employment, the two types of unemployed workers have different threat points, which delivers equilibrium wage dispersion. The parameters of the model are estimated for France, and the model is also calibrated for Denmark and the U.S. Re-entitlement effects are shown to be sizeable for all three countries. For France, re-entitlement effects lower by 15% the rise in the wage and by 25% the rise in unemployment following a 10% increase in the benefit level. Finally, we show that in all three countries the optimal compensation system is characterized by time-decreasing unemployment benefits and non-automatic eligibility for UI, with higher levels of both UI and UA benefits, a smaller decrease in benefits over time, and a longer employment duration required for UI eligibility than in the current system.

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:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 2 (April)
Pages: 368-382

in new window

Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:368-382
Contact details of provider: Web page:

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. Cahuc, Pierre & Malherbet, Franck, 2002. "Unemployment Compensation Finance and Labour Market Rigidity," CEPR Discussion Papers 3512, C.E.P.R. Discussion Papers.
  2. Wadsworth, Jonathan, 1991. "Unemployment Benefits and Search Effort in the UK Labour Market," Economica, London School of Economics and Political Science, vol. 58(229), pages 17-34, February.
  3. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  4. Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January.
  5. Michele Pellizzari, 2004. "Unemployment Duration and the Interactions Between Unemployment Insurance and Social Assistance," Working Papers 272, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Bruce C. Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
  7. Nicola Pavoni, 2009. "Optimal Unemployment Insurance, With Human Capital Depreciation, And Duration Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 323-362, 05.
  8. James Albrecht & Susan Vroman, 2001. "Equilibrium Search with Time-Varying Unemployment Benefits," CESifo Working Paper Series 487, CESifo Group Munich.
  9. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series 1998:2, Uppsala University, Department of Economics.
  10. Pavoni, Nicola, 2007. "On optimal unemployment compensation," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1612-1630, September.
  11. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  12. Adrian Masters & Melvyn Coles, 2004. "Optimal Unemployment Insurance in a Matching Equilibrium," Discussion Papers 04-12, University at Albany, SUNY, Department of Economics.
  13. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  14. John M. Barron & Wesley Mellow, 1979. "Search Effort in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 389-404.
  15. Cahuc, Pierre & Lehmann, Etienne, 2000. "Should unemployment benefits decrease with the unemployment spell?," Journal of Public Economics, Elsevier, vol. 77(1), pages 135-153, July.
  16. Williamson, Stephen D. & Wang, Cheng, 1999. "Moral Hazard, Optimal Unemployment Insurance, and Experience Rating," Working Papers 99-03, University of Iowa, Department of Economics.
  17. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, July.
  18. Frederick J. Tannery, 1983. "Search Effort and Unemployment Insurance Reconsidered," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 432-440.
  19. Melvyn Coles & Adrian Masters, 2004. "Duration-Dependent Unemployment Insurance Payments and Equilibrium Unemployment," Economica, London School of Economics and Political Science, vol. 71, pages 83-97, 02.
  20. repec:oup:restud:v:57:y:1990:i:2:p:279-98 is not listed on IDEAS
  21. Jones, Stephen R G, 1989. "Job Research Methods, Intensity and Effects," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 277-96, August.
  22. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  23. Schmitt, John & Wadsworth, Jonathan, 1993. "Unemployment Benefit Levels and Search Activity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(1), pages 1-24, February.
  24. Laurence Rioux, 2001. "Salaire de réserve, allocation chômage dégressive et revenu minimum d'insertion," Économie et Statistique, Programme National Persée, vol. 346(1), pages 137-160.
  25. Laurence Rioux, 2001. "Recherche d'emploi et insertion professionnelle des allocataires du RMI," Économie et Statistique, Programme National Persée, vol. 346(1), pages 13-32.
  26. Dale T. Mortensen, 1977. "Unemployment Insurance and Labor Supply Decisions," Discussion Papers 271, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:368-382. 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: (Zhang, Lei)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.