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Part-Time Unemployment and Optimal Unemployment Insurance

Listed author(s):
  • Ek, Susanne

    ()

    (Department of Economics)

  • Holmlund, Bertil

    (Department of Economics)

A significant fraction of the labor force consists of employed workers who are part-time unemployed (underemployed) in the sense that they are unable to work as much as they prefer. This paper develops a search and matching model to study the design of optimal unemployment insurance in an economy with unemployment as well as part-time unemployment. Part-time unemployment provides income insurance and serves as a stepping stone to full-time jobs. Unemployment benefits for part-timers increase the outflow from unemployment to part-time work but reduce the outflow from part-time work to fulltime employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate nonnegligible welfare gains associated with time limits for unemployment benefits as well as for part-time benefits. The welfare gains from optimal UI are larger when wages are fixed than when they are flexible.

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File URL: http://uu.diva-portal.org/smash/get/diva2:402197/FULLTEXT01.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2011:4.

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Length: 36 pages
Date of creation: 28 Feb 2011
Handle: RePEc:hhs:uunewp:2011_004
Contact details of provider: Postal:
Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  1. Gautier, Pieter A, 2002. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers," Economica, London School of Economics and Political Science, vol. 69(273), pages 21-40, February.
  2. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  3. Tomi Kyyrä & Pierpaolo Parrotta & Michael Rosholm, 2009. "The effect of receiving supplementary UI benefits on unemployment duration," Working Papers 1, Government Institute for Economic Research Finland (VATT).
  4. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
  5. Tatsiramos, K. & van Ours, J.C., 2012. "Labor Market Effects of Unemployment Insurance Design," Discussion Paper 2012-082, Tilburg University, Center for Economic Research.
  6. Leslie S. Stratton, 1996. "Are “Involuntary†Part-Time Workers Indeed Involuntary?," ILR Review, Cornell University, ILR School, vol. 49(3), pages 522-536, April.
  7. McCall, Brian P, 1996. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Econometrica, Econometric Society, vol. 64(3), pages 647-682, May.
  8. Tomi Kyyrä, 2008. "Partial Unemployment Insurance Benefits and the Transition Rate to Regular Work," Discussion Papers 440, Government Institute for Economic Research Finland (VATT).
  9. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
  10. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  11. JuanJ. Dolado & Marcel Jansen & JuanF. Jimeno, 2009. "On-the-Job Search in a Matching Model with Heterogeneous Jobs and Workers," Economic Journal, Royal Economic Society, vol. 119(534), pages 200-228, 01.
  12. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, 09.
  13. repec:uwp:jhriss:v:5:y:1970:i:2:p:160-176 is not listed on IDEAS
  14. StÈphane Bonhomme & GrÈgory Jolivet, 2009. "The pervasive absence of compensating differentials," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(5), pages 763-795.
  15. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-1674, September.
  16. Karl BRENKE & Ulf RINNE & Klaus F. ZIMMERMANN, 2013. "Short-time work: The German answer to the Great Recession," International Labour Review, International Labour Organization, vol. 152(2), pages 287-305, 06.
  17. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-399, April.
  18. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving incentives in unemployment insurance: A review of recent research," Working Paper Series 2003:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  19. repec:uwp:jhriss:v:9:y:1974:i:3:p:420-422 is not listed on IDEAS
  20. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  21. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
  22. Simon Burgess & Helene Turon, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies – A Comment," Bristol Economics Discussion Papers 05/573, Department of Economics, University of Bristol, UK.
  23. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-846, December.
  24. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  25. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
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