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Envy-Minimizing Unemployment Benefits

Listed author(s):
  • Arnsperger, Christian

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Chaire Hoover)

  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

This paper offers an analysis of the optimality of unemployment benefits based on the concept of no-envy. Using a general equilibrium framework whit uncertainty, we derive the conditions for a trade-off between the intensity of envy and the expected percentage of envious persons. If the government’s aversion for the intensity of envy is not too strong (alongside conditions on households’ utilities), the optimal benefit is positive and below the full insurance level. We also show that, for a low enough aversion for the intensity of envy, the optimal replacement ratio decreases with unfavorable changes in the distribution of the technological shock.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1995001.

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Length: 21
Date of creation: 01 Dec 1994
Handle: RePEc:ctl:louvir:1995001
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  1. David Easley & Nicholas M. Kiefer & Uri Possen, 1985. "An Equilibrium Analysis of Optimal Unemployment Insurance and Taxation," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 989-1010.
  2. Feldman, Allan M & Kirman, Alan, 1974. "Fairness and Envy," American Economic Review, American Economic Association, vol. 64(6), pages 995-1005, December.
  3. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-193.
  4. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
  5. Diamantaras, Dimitrios & Thomson, William, 1990. "A refinement and extension of the no-envy concept," Economics Letters, Elsevier, vol. 33(3), pages 217-222, July.
  6. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  7. William THOMSON, 1994. "L’absence d’envie ; une introduction," Discussion Papers (REL - Recherches Economiques de Louvain) 1994012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
  9. Varian, Hal R., 1974. "Equity, envy, and efficiency," Journal of Economic Theory, Elsevier, vol. 9(1), pages 63-91, September.
  10. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  11. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  12. Elisha A. Pazner & David Schmeidler, 1978. "Egalitarian Equivalent Allocations: A New Concept of Economic Equity," The Quarterly Journal of Economics, Oxford University Press, vol. 92(4), pages 671-687.
  13. Moulin, Herve, 1994. "Social choice," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 31, pages 1091-1125 Elsevier.
  14. Nicolas Marceau & Robin Boadway, 1991. "The Redistributive Role of Minimum Wage Legislation and Unemployment Insurance," Working Papers 805, Queen's University, Department of Economics.
  15. Brown, Murray & Wolfstetter, Elmar, 1988. " Optimal Unemployment Insurance and Experience Rating," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(4), pages 529-547.
  16. Lindbeck, A. & Molander, P. & Persson, T. & Paterson, O. & Sandmo, A. & Swedenborg, B. & Thygesen, N., 1993. "Options for Economic and Political Reform in Sweden," Papers 540, Stockholm - International Economic Studies.
  17. Wadsworth, Jonathan, 1991. "Unemployment Benefits and Search Effort in the UK Labour Market," Economica, London School of Economics and Political Science, vol. 58(229), pages 17-34, February.
  18. Phipps, Shelley, 1991. "Equity and Efficiency Consequences of Unemployment Insurance Reform in Canada: The Importance of Sensitivity Analyses," Economica, London School of Economics and Political Science, vol. 58(230), pages 199-214, May.
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