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Business Cycle Dependent Unemployment Insurance

  • Torben M. Andersen
  • Michael Svarer

The consequences of cylical contingencies in unemployment insurance systems are considered in a search-matching model allowing for shifts between “good” and “bad” states of nature. An argument for state contingencies is that insurance arguments are stronger and incentive effects weaker in "bad" than in "good" states of nature. We con.rm this and show that cyclically dependent benefit levels not only provide better insurance but may have structural effects implying that the structural (average) unemployment rate decreases, although the variability of unemployment may increase

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1498.

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Length: 41 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:kie:kieliw:1498
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  25. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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