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Unemployment Compensation Finance and Aggregate Employment Fluctuations

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  • Malherbet, Franck
  • L'Haridon, Olivier

Abstract

Experience rating which is often treated as a simple adjustment cost is an original feature of the US unemployment benefit system. This Paper extensively addresses the effect of experience rating as an alternative to standard job protection. We provide a simple matching model of unemployment that handles both idiosyncratic and aggregate shocks. In such a framework, we show that experience rating tends to increase labour market performances. Indeed, moving toward an experience rated system tends to stabilize employment. Additionally, for reasonable parameter values average employment and production are increased over the cycle. Therefore, it may be worthwhile to shift standard job protection measures toward a more experience rated system.

Suggested Citation

  • Malherbet, Franck & L'Haridon, Olivier, 2002. "Unemployment Compensation Finance and Aggregate Employment Fluctuations," CEPR Discussion Papers 3614, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3614
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    1. Olivier L'Haridon & Franck Malherbet, 2001. "Job Protection and Aggregate Employment Fluctuations : A Reappraisal," Working Papers 2001-36, Center for Research in Economics and Statistics.
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    Cited by:

    1. Breiding, Torsten, 2006. "Die Arbeitslosenversicherung in Deutschland – Beitrag zur Bekämpfung oder Ursache von Arbeitslosigkeit [The unemployment insurance in Germany - does it cause or does it help to overcome unemploymen," MPRA Paper 20999, University Library of Munich, Germany.
    2. Olivier L'Haridon & Franck Malherbet, 2003. "Protection de l'emploi et performance du marché du travail. Commentaire de Bertrand Martinot," Revue Française d'Économie, Programme National Persée, vol. 17(4), pages 21-83.
    3. Florian Baumann & Nikolai Stähler, 2008. "Union Power as a Reason for Europe Not to Introduce Experience Rating?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 568-585, September.
    4. Olivier L’Haridon, 2005. "Financement des politiques du marché du travail et protection de l'emploi," Economie & Prévision, La Documentation Française, vol. 168(2), pages 43-62.
    5. Franck Malherbet & Mustafa Ulus, 2003. "Unemployment Insurance and Labor Reallocation," Working Papers 2003-17, Center for Research in Economics and Statistics.

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    More about this item

    Keywords

    Matching models; Job protection; Experience rating; Employment fluctuation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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