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Duration Dependent Unemployment Insurance and Stabilisation Policy

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  • Adrian Masters
  • Melvyn Coles

Abstract

In the context of a standard equilibrium matching framework, this paper shows how a duration dependent unemployment insurance (UI) system stabilises unemployment levels over the business cycle. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal tranfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilises unemployment levels over the cycle.

Suggested Citation

  • Adrian Masters & Melvyn Coles, 2004. "Duration Dependent Unemployment Insurance and Stabilisation Policy," Discussion Papers 04-10, University at Albany, SUNY, Department of Economics.
  • Handle: RePEc:nya:albaec:04-10
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    File URL: http://www.albany.edu/economics/research/workingp/2004/sfweb.pdf
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    References listed on IDEAS

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    Cited by:

    1. Melvyn Coles & Adrian Masters, 2006. "Optimal Unemployment Insurance in a Matching Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 109-138, January.
    2. Miquel Faig, 2008. "Labor Market Cycles and Unemployment Insurance Eligibility," 2008 Meeting Papers 183, Society for Economic Dynamics.

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