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On-the-job search equilibrium with endogenous unemployment benefits

  • Chéron, Arnaud
  • Langot, François

This paper develops an on-the-job search model with wage posting where unemployment benefits are proportional to past wages. We emphasize that this contributes to increasing the reservation wages of unemployed workers and introduces a feedback effect of the distribution of wages on the distribution of unemployment benefits. We show that the model predictions are consistent with some stylized French facts and quantify the impact of inefficient rejections of low-wage offers by the unemployed. We find that, by reducing the indexing of unemployment benefits to previous earnings and increasing lump-sum transfers, it is possible to increase both employment and welfare.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 2 (April)
Pages: 383-391

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Handle: RePEc:eee:labeco:v:17:y:2010:i:2:p:383-391
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-62, December.
  2. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2008. "A Quantitative Evaluation of Payroll Tax Subsidies For Low-Wage Workers: An Equilibrium Search Approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00270295, HAL.
  3. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "To Match or Not To Match ? Optimal Wage Policy with Endogenous Worker search Intensity," Working Papers 2002-59, Centre de Recherche en Economie et Statistique.
  4. Melvyn Coles & Carlos Carrillo-Tudela & Ken Burdett, 2008. "Human Capital Accumulation and Labor Market Equilibrium," 2008 Meeting Papers 1088, Society for Economic Dynamics.
  5. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  6. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  7. Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," Working papers 99-29, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-58, May.
  9. Postel-Vinay & Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Working Papers 155908, Institut National de la Recherche Agronomique, France.
  10. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. mismatch of talents: Reconsidering unemployment benefits," Economics Working Papers 211, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  12. Jesper Bager & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "A Feasible Equilibrium Search Model of Individual Wage Dynamics with Experience Accumulation," 2006 Meeting Papers 679, Society for Economic Dynamics.
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