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The Simple Economics of Benefit Transfers

Author

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  • Dennis J. Snower

Abstract

The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits into employment subsidies--“benefit transfers” for short--would help replace the unemployment trap by an incentive to work. The vouchers rise with people’s unemployment durations and with the amount of training provided. The policy would be costless to the government since the cost of the employment vouchers is set equal to the amount saved on unemployment benefits. It would not be inflationary since the long-term unemployed, on whom the vouchers are targeted, have little influence on wage setting.

Suggested Citation

  • Dennis J. Snower, 1995. "The Simple Economics of Benefit Transfers," IMF Working Papers 95/5, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:95/5
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    Citations

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    Cited by:

    1. Berthold, Norbert & Fehn, Rainer & Thode, Eric, 1999. "Rigide Arbeitsmärkte und ungleiche Einkommensverteilung: Ein unlösbares Dilemma?," Discussion Paper Series 31, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    2. Annamaria Simonazzi & Paola Villa, 1999. "Flexibility and Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(3), pages 281-311.
    3. Arntz, Melanie & Boeters, Stefan & Gürtzgen, Nicole & Schubert, Stefanie, 2008. "Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation," Economic Modelling, Elsevier, vol. 25(3), pages 422-439, May.
    4. Milan Vodopivec, 2004. "Income Support for the Unemployed : Issues and Options," World Bank Publications, The World Bank, number 14922.
    5. Steffen J. Roth, 2003. "Arbeitsmarktinstrumente und gesellschaftliche Normen - Das Mainzer-Modell untergräbt gesellschaftliche Normen und verschärft damit die Probleme, die es zu überwinden glaubt," Otto-Wolff-Institut Discussion Paper Series 01/2003, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    6. Fehn, Rainer, 2002. "Arbeitsmarktflexibilisierung und Arbeitslosigkeit," Discussion Paper Series 54, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    7. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection and Labor Policy and Technical Notes 25529, The World Bank.
    8. Martin Petrick & Ingo Pies, 2007. "In search for rules that secure gains from cooperation: the heuristic value of social dilemmas for normative institutional economics," European Journal of Law and Economics, Springer, vol. 23(3), pages 251-271, June.
    9. Berthold, Norbert & von Berchem, Sascha, 2003. "Die Sozialhilfe zwischen Effizienz und Gerechtigkeit: wie kann der Spagat gelingen?," Discussion Paper Series 62, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    10. Karl Whelan, 1997. "Unemployment and the durational structure of exit rates," Finance and Economics Discussion Series 1997-54, Board of Governors of the Federal Reserve System (U.S.).
    11. Berthold, Norbert & Fehn, Rainer, 1998. "Die zehn Gebote der Arbeitsmarktpolitik," Discussion Paper Series 21, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    12. Melanie Arntz & Stefan Boeters & Nicole Gürtzgen & Stefanie Schubert, 2006. "Analysing Welfare Reform in a Microsimulation-AGE Model," Computing in Economics and Finance 2006 109, Society for Computational Economics.
    13. Vodopivec, Milan, 1995. "Unemployment insurance and duration of unemployment : evidence from Slovenia's transition," Policy Research Working Paper Series 1552, The World Bank.

    More about this item

    Keywords

    Wages; unemployment; employment; unemployed; unemployment benefits; labor demand;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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