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Indexation Of Unemployment Benefits To Previous Earnings, Employment And Wages

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  • Heer, Burkhard
  • Morgenstern, Albrecht

Abstract

In most OECD countries, unemployment benefits are tied to individual previous labor earnings. We study the progressivity of this indexation with regard to its effects on employment, output and wages in four equilibrinin models of the labor market keeping the level of unemployment benefits fixed. In the two cases of competitive labor markets and decentralized wage bargaining, employment and output increase, while wages decrease with the degree of indexation. In the model with search unemployment and Nash wage bargaining, all wages, employment and output increase, while die indexation of employirient benefits to previous carnings has no effect in the case of efficiency wages. In addition, our results suggest that a more progressive mdexation of unemployment benefits to labor earnings is wellare enhancing.

Suggested Citation

  • Heer, Burkhard & Morgenstern, Albrecht, 2000. "Indexation Of Unemployment Benefits To Previous Earnings, Employment And Wages," Discussion Papers in Economics 30, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:30
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    References listed on IDEAS

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    1. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-399, April.
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    Cited by:

    1. Beissinger, Thomas & Büsse, Oliver, 2002. "The Impact of the Unemployment Benefit System on International Spillover Effects," University of Regensburg Working Papers in Business, Economics and Management Information Systems 376, University of Regensburg, Department of Economics.
    2. Thomas Beissinger & Oliver Büsse, 2001. "Bismarck versus Beveridge: Which Unemployment Compensation System is more Prone to Labor Market Shocks?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 1-78, December.
    3. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
    4. Stéphanie Jamet & Thomas Chalaux & Vincent Koen, 2013. "Labour Market and Social Policies to Foster More Inclusive Growth in Sweden," OECD Economics Department Working Papers 1023, OECD Publishing.
    5. Laszlo Goerke & Markus Pannenberg & Heinrich Ursprung, 2010. "A positive theory of the earnings relationship of unemployment benefits," Public Choice, Springer, vol. 145(1), pages 137-163, October.
    6. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(3), pages 545-571, September.
    7. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-Related Unemployment Benefits in a Unionised Economy," IZA Discussion Papers 701, Institute for the Study of Labor (IZA).
    8. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.

    More about this item

    Keywords

    Unemployment Benefits ; Progressive Indexation ; Union Wage-Setting ; Search Unemployment ; Efficiency Wages;

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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