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Time Limits in a Two-tier Unemployment Benefit Scheme under Involuntary Unemployment

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  • Christian Holzner
  • Volker Meier
  • Martin Werding

Abstract

The consequences of introducing or tightening time limits on the receipt of high unemployment benefits are studied in a shirking model. Stricter time limits have an ambiguous impact on the net wage, and changes of utility levels of employed workers and recipients of high unemployment benefits have the same sign as the variation in the net wage. The utility differential between the two groups of unemployed shrinks. The relative income position of skilled workers moves in the same direction as the net wage of unskilled workers. When access to high benefits is denied for shirkers who are caught, stricter time limits may decrease employment. (JEL codes: H53, J41, J60) Copyright The Author 2009. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Christian Holzner & Volker Meier & Martin Werding, 2010. "Time Limits in a Two-tier Unemployment Benefit Scheme under Involuntary Unemployment," CESifo Economic Studies, CESifo Group, vol. 56(2), pages 251-277, June.
    • Handle: RePEc:oup:cesifo:v:56:y:2010:i:2:p:251-277
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifp027
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    Cited by:

    1. Wang, Cheng & Williamson, Stephen D., 2002. "Moral hazard, optimal unemployment insurance, and experience rating," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1337-1371, October.
    2. Wang, Cheng & Williamson, Stephen, 1996. "Unemployment insurance with moral hazard in a dynamic economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 1-41, June.

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    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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