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Unemployment compensation under partial program coverage

  • Regev, Tali

More than half of the unemployed in the U.S. are not covered by unemployment insurance. For them the provision of employment-dependent UI creates an additional benefit from work: future UI eligibility. This paper explores the overall and distributional effects of providing unemployment compensation under partial coverage. I extend a standard search model to accommodate eligible and non-eligible workers, where eligibility status is determined by previous separation history. While the effect of unemployment benefits on unemployment duration and post unemployment wages is theoretically ambiguous, a calibration of the model to the U.S. economy shows that unemployment benefits raise the unemployment rate. In addition I show that wage gaps and unemployment duration differentials between the eligible and non-eligible exist and are larger when layoffs are high.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 6 ()
Pages: 888-897

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Handle: RePEc:eee:labeco:v:19:y:2012:i:6:p:888-897
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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