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Firm Productivity Dispersion and the Matching Role of UI Policy

  • Blumkin, Tomer

    ()

    (Ben Gurion University)

  • Hadar, Yossi

    ()

    (Ben Gurion University)

  • Yashiv, Eran

    ()

    (Tel Aviv University)

This paper studies optimal UI policy from the perspective of worker assignment to heterogenous jobs in an environment of random matching. Workers react to UI policy through job acceptance decisions; firms react to UI policy through wage posting. There is endogenous assortative matching as a result of the fact that UI policy induces a time profile for reservation wages, shifting the labor force towards the more productive firms. The relation between productivity dispersion and UI policy is mediated by the wage posting policies of firms that take both productivity and policy into account. Optimal UI policy is shown to crucially depend on the properties of the firm productivity distribution, such as its variance and skewness.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1733.

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Length: 44 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1733
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  1. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  2. Fredriksson, P. & Holmlund, B., 1998. "Optimal Unemployment Insurance in Search Equilibrium," Papers 1998-2, Uppsala - Working Paper Series.
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  11. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  12. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
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