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Unemployment Insurance and Training in an Equilibrium Matching Model with Heterogeneous Agents

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  • Bruno Van Der Linden

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Abstract

This paper develops a joint evaluation of vocational training and unemployment insurance.This allows to analyze how these schemes complement each other from theviewpoints of labor market indicators and of welfare. For this purpose, a generalequilibrium matching model is built where workers are heterogeneous and risk averse.Heterogeneity allows to look at the distribution of the effects. Job search effort andwages are endogenous in order to deal with the induced effects of these schemes. Thenet effect of these training programs appears to be gloomy. However, their impacton employment can be deeply affected by the design of passive policies. A decliningtime profile of benefit payments dominates a scheme with a constant replacement ratio.However, the optimal expected length of payment of ‘high' benefits can vary alot in the population. A reform that would relate this expected duration to searcheffort does not appear to produce substantial effects on any of the evaluation criteria.Performance indicators of the labor market and welfare criteria often vary in oppositedirections after a reform. This questions the widespread focus on labor marketindicators to guide the design of institutional reforms.

Suggested Citation

  • Bruno Van Der Linden, 2003. "Unemployment Insurance and Training in an Equilibrium Matching Model with Heterogeneous Agents," Working Papers 2003-01, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2003-01
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    Cited by:

    1. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
    2. Conny Wunsch, 2013. "Optimal Use of Labor Market Policies: The Role of Job Search Assistance," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1030-1045, July.
    3. Bruno, VAN DER LINDEN, 2005. "Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness," Discussion Papers (ECON - Département des Sciences Economiques) 2005007, Université catholique de Louvain, Département des Sciences Economiques.

    More about this item

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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