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

  • Christian Holzner

    ()

  • Volker Meier

    ()

  • Martin Werding

The consequences of introducing or tightening time limits on receiving high unemploymentbenefits are studied in a shirking model. Stricter time limits have an ambiguousimpact on the net wage, and changes of utility levels of employed workers and recipientsof high unemployment benefits have the same sign as the variation in the netwage. The utility differential between the two groups of unemployed shrinks. The relativeincome position of skilled workers moves in the same direction as the net wage ofunskilled workers. When access to high benefits is denied for caught shirkers, strictertime limits may decrease employment.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-Ifo_Working_Papers/wp-ifo-2005-2010/IfoWorkingPaper-29.pdf
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Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Papers No. 29.

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Date of creation: 2006
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Handle: RePEc:ces:ifowps:_29
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  1. Fredriksson, P. & Holmlund, B., 1998. "Optimal Unemployment Insurance in Search Equilibrium," Papers 1998-2, Uppsala - Working Paper Series.
  2. 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.
  3. Wang, Cheng & Williamson, Steve, 1996. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Staff General Research Papers 5088, Iowa State University, Department of Economics.
  4. John Hassler & José V. Rodriguez Mora, 2002. "Should UI Benefits Really Fall over Time?," CESifo Working Paper Series 804, CESifo Group Munich.
  5. Arulampalam, Wiji & Stewart, Mark B, 1995. "The Determinants of Individual Unemployment Durations in an Era of High Unemployment," Economic Journal, Royal Economic Society, vol. 105(429), pages 321-32, March.
  6. Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
  7. Williamson, Stephen D. & Wang, Cheng, 1999. "Moral Hazard, Optimal Unemployment Insurance, and Experience Rating," Working Papers 99-03, University of Iowa, Department of Economics.
  8. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  9. 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.
  10. James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
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