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Net Replacement Rates of the Unemployed. Comparison of various approaches

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  • Aino Salomäki
  • Teresa Munzi

Abstract

The study reviews various approaches applied in computing net replacement rates for the unemployed. Until now, there have been relatively new comparative studies on net replacement rates. Most of them are based on simulation calculations for a set of stylised households. The stylised calculation method has given rise to discussion for a number of reasons such as different results in various studies, non-representative stylised households and sensitivity to various assumptions. In order to verify the results of stylised approaches, the Commission services have conducted this study on the basis of the European Community Household Panel (ECHP) data from 1993. For this purpose, an empirical equivalent for the net replacement rate is constructed by comparing the out-of-work income of the unemployed with the in-work income of the employed. The main body of the study analyses the results of the ECHP data. Moreover, the study discusses differences in approaches applied in various studies, their advantages and disadvantages as well as data issues.

Suggested Citation

  • Aino Salomäki & Teresa Munzi, 1999. "Net Replacement Rates of the Unemployed. Comparison of various approaches," European Economy - Economic Papers 2008 - 2015 133, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0133
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    File URL: http://ec.europa.eu/economy_finance/publications/pages/publication11184_en.pdf
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    References listed on IDEAS

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    1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    2. Rebecca M. Blank & Richard B. Freeman, 1994. "Evaluating the Connection between Social Protection and Economic Flexibility," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 21-42 National Bureau of Economic Research, Inc.
    3. Ben-Horim, Moshe & Zuckerman, Dror, 1987. "The Effect of Unemployment Insurance on Unemployment Duration," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 386-390, July.
    4. Richard W. Blundell, 1995. "The Impact of Taxation on Labour Force Participation and Labour Supply," OECD Jobs Study Working Papers 8, OECD Publishing.
    5. Ahn, Namkee & Ugidos-Olazabal, Arantza, 1995. "Duration of Unemployment in Spain: Relative Effects of Unemployment Benefit and Family Characteristics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(2), pages 249-264, May.
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    Cited by:

    1. Gomes, Pedro Maia, 2017. "Heterogeneity and the Public Sector Wage Policy," IZA Discussion Papers 11091, Institute for the Study of Labor (IZA).
    2. repec:beo:journl:v:62:y:2017:i:214:p:87-106 is not listed on IDEAS
    3. Immervoll, Herwig & O'Donoghue, Cathal, 2002. "Welfare benefits and work incentives: an analysis of the distribution of net replacement rates in Europe using EUROMOD, a multi-country microsimulation model," EUROMOD Working Papers EM4/01, EUROMOD at the Institute for Social and Economic Research.
    4. Taslimi, Mohammad, 2003. "Optimal Earnings-Related Unemployment Benefits," Working Paper Series 2003:16, Uppsala University, Department of Economics.
    5. Vera Brusentsev & Wayne Vroman, 2007. "Unemployment Compensation Recipiency in English-speaking Countries," Working Papers 07-15, University of Delaware, Department of Economics.

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    Keywords

    echp; labour; market;

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