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Welfare Differentials Across French and US Labour Markets

Author

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  • Cohen, Daniel

Abstract

The paper computes lifetime welfare functions for French and American workers. For the vast majority of workers, we find that the lifetime discrepancy between the welfare of an employed and that of an unemplyed worker appear to quite similar in the two countries, corresponding to nine monthly wages in the US, and 13 monthly wages in France. From these and othervalues, we then calibrate standard parameters of equilibrium theories of unemployment such as hiring and firing costs and the quantitative incidence of unemployment benefit onto the equilibrium hiring rates. We find that the latter factor dominates the other. Because of the heterogeneity that we document on the labour market, we show, however, why reducing the level of French unemployment benefits to the level of American ones would dramatically reduce the welfare of the most vulnerable workers on the labour market.

Suggested Citation

  • Cohen, Daniel, 1999. "Welfare Differentials Across French and US Labour Markets," CEPR Discussion Papers 2114, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2114
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    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
    3. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
    4. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    5. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Paul Frijters & Maarten Lindeboom & Gerard van den Berg, 2000. "Persistencies in the Labour Market," School of Economics and Finance Discussion Papers and Working Papers Series 087a, School of Economics and Finance, Queensland University of Technology.

    More about this item

    Keywords

    Labour Market Dynamics; Ranking; Unemployment Duration; wage earnings inequality;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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