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

  • Bruno Van Der Linden

    (Crest)

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.

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2003-01.

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Date of creation: 2003
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Handle: RePEc:crs:wpaper:2003-01
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  9. James Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," NBER Working Papers 9002, National Bureau of Economic Research, Inc.
  10. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
  11. Calmfors, Lars & Lang, Harald, 1995. "Macroeconomic Effects of Active Labour Market Programmes in a Union Wage-Setting Model," Economic Journal, Royal Economic Society, vol. 105(430), pages 601-19, May.
  12. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2002. "Optimal unemployment insurance with monitoring and sanctions," Working Paper Series 2002:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  13. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-86, May.
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  15. Alan Manning, 2001. "Monopsony and the Efficiency of Labour Market Interventions," CEP Discussion Papers dp0514, Centre for Economic Performance, LSE.
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  17. Boone, J. & Bovenberg, A.L., 2000. "Optimal Labour Taxation and Search," Discussion Paper 2000-17, Tilburg University, Center for Economic Research.
  18. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-65, April.
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  22. Acemoglu, Daron, 1995. "Public Policy in a Model of Long-Term Unemployment," Economica, London School of Economics and Political Science, vol. 62(246), pages 161-78, May.
  23. Muriel Dejemeppe & Yves Saks, 2002. "A New Light into Regional Unemployment Disparities in Belgium : Longitudinal Analysis of Grouped Duration Data," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  26. 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.
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  33. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
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  38. Bruce Meyer, 2002. "Unemployment and workers' compensation programmes: rationale, design, labour supply and income support ," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 1-49, March.
  39. Belot, M.V.K. & van Ours, J.C., 2001. "Unemployment and labor market institutions : An empirical analysis," Other publications TiSEM 29a3de46-e7bc-4b3d-abe5-b, School of Economics and Management.
  40. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  41. Andrea Bassanini & Jørn Henrik Rasmussen & Stefano Scarpetta, 1999. "The Economic Effects of Employment-Conditional Income Support Schemes for the Low-Paid: An Illustration from a CGE Model Applied to Four OECD Countries," OECD Economics Department Working Papers 224, OECD Publishing.
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