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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.

Suggested Citation

  • Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2005. "Firm Productivity Dispersion and the Matching Role of UI Policy," IZA Discussion Papers 1733, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1733

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    References listed on IDEAS

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    4. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
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    7. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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    9. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
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    12. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, vol. 10(3), pages 403-425, December.
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    14. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
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    Cited by:

    1. Alexandron-Lavon, Anat & Epstein, Gil S. & Lindner Pomerantz, Renana, 2017. "The Effect of Ideological Positions on Job Market Interaction," IZA Discussion Papers 11152, Institute for the Study of Labor (IZA).
    2. repec:eee:jeborg:v:145:y:2018:i:c:p:261-274 is not listed on IDEAS
    3. Tomer Blumkin & Efraim Sadka, 2010. "Rising UI benefits over time," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(5), pages 501-517, October.

    More about this item


    productivity; heterogeneity; UI policy; endogenous assortative matching; search;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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