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Part-Time Unemployment and Optimal Unemployment Insurance

  • Ek Spector, Susanne

    ()

    (Confederation of Swedish Enterprise)

  • Holmlund, Bertil

    ()

    (Uppsala University)

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 full-time employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate non-negligible 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5540.

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Length: 32 pages
Date of creation: Feb 2011
Date of revision:
Publication status: published in International Tax and Public Finance, 2015, 22(2), 201-223
Handle: RePEc:iza:izadps:dp5540
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  7. Kyyrä, Tomi, 2010. "Partial unemployment insurance benefits and the transition rate to regular work," European Economic Review, Elsevier, vol. 54(7), pages 911-930, October.
  8. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series 1998:2, Uppsala University, Department of Economics.
  9. 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.
  10. Marcus Hagedorn & Iourii Manovskii, 2007. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," IEW - Working Papers 351, Institute for Empirical Research in Economics - University of Zurich.
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  15. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2009. "The Effect of Receiving Supplementary UI Benefits on Unemployment Duration," Working Papers 09-1, University of Aarhus, Aarhus School of Business, Department of Economics.
  16. Leslie S. Stratton, 1996. "Are “Involuntary†Part-Time Workers Indeed Involuntary?," ILR Review, Cornell University, ILR School, vol. 49(3), pages 522-536, April.
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  18. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  19. McCall, B.P., 1993. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Papers 93-07, Minnesota - Industrial Relations Center.
  20. 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.
  21. Raymond Munts, 1970. "Partial Benefit Schedules in Unemployment Insurance: Their Effect on Work Incentive," Journal of Human Resources, University of Wisconsin Press, vol. 5(2), pages 160-176.
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  23. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  24. 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.
  25. Arlene Holen & Stanley Horowitz, 1974. "Partial Unemployment Insurance Benefits and the Extent of Partial Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 9(3), pages 420-422.
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