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Unemployment compensation under partial program coverage

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  • Regev, Tali

Abstract

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.

Suggested Citation

  • Regev, Tali, 2012. "Unemployment compensation under partial program coverage," Labour Economics, Elsevier, vol. 19(6), pages 888-897.
  • Handle: RePEc:eee:labeco:v:19:y:2012:i:6:p:888-897
    DOI: 10.1016/j.labeco.2012.09.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment insurance; Unemployment compensation; Insurance eligibility; Partial coverage;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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