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Unemployment Compensation Finance and Aggregate Employment Fluctuations

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  • Olivier L'Haridon

    (Crest)

  • Franck Malherbet

    (Crest)

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.
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Suggested Citation

  • Olivier L'Haridon & Franck Malherbet, 2002. "Unemployment Compensation Finance and Aggregate Employment Fluctuations," Working Papers 2002-48, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2002-48
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    2. 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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    8. Cole, Harold L & Rogerson, Richard, 1999. "Can the Mortensen-Pissarides Matching Model Match the Business-Cycle Facts?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 933-959, November.
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    Citations

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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. Franck Malherbet & Mustafa Ulus, 2003. "Unemployment Insurance and Labor Reallocation," Working Papers 2003-17, Center for Research in Economics and Statistics.
    3. 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.
    4. 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.
    5. Olivier l'Haridon, 2005. "Financement des politiques du marché du travail et protection de l'emploi," Économie et Prévision, Programme National Persée, vol. 168(2), pages 43-62.

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    More about this item

    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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