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Incentive Contracts and Efficient Unemployment Benefits in a Globalized World

Listed author(s):
  • Carsten Helm

    ()

    (University of Oldenburg)

  • Dominique Demougin

    ()

    (European Business School at the EBS University, Wiesbaden)

Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyse this issue in a principal-agent model, higher level of unemployment benefits improves the workers' position in wage bargaining, leading to stronger effort incentives and higher output. However, it also reduces incentives for labor market participation. Accordingly, there is a trade-off. We analyze how changes in the economic environment such as globalization and better educated workers affect this trade-off.

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File URL: http://www.vwl.uni-oldenburg.de/download/V-348-12.pdf
File Function: First version, 2012
Download Restriction: no

Paper provided by University of Oldenburg, Department of Economics in its series Working Papers with number V-348-12.

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Length: 22 pages
Date of creation: Aug 2012
Date of revision: Aug 2012
Publication status: Published in Oldenburg Working Papers V-348-12
Handle: RePEc:old:dpaper:348
Contact details of provider: Postal:
26111 Oldenburg

Phone: +49 441 798-4107
Fax: +49 441 798-4116
Web page: http://www.vwl.uni-oldenburg.de/
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  1. Holmlund, Bertil, 1997. "Unemployment Insurance in Theory and Practice," Working Paper Series 1997:25, Uppsala University, Department of Economics.
  2. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
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  7. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  8. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, December.
  9. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
  10. Dellas, Harris, 1997. "Unemployment insurance benefits and human capital accumulation," European Economic Review, Elsevier, vol. 41(3-5), pages 517-524, April.
  11. Michel Dumont & Glenn Rayp & Peter Willemé, 2006. "Does internationalization affect union bargaining power? An empirical study for five EU countries," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 77-102, January.
  12. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Alex Bryson & Richard Freeman & Claudio Lucifora & Michele Pellizzari & Virginie Perotin, 2012. "Paying for Performance: Incentive Pay Schemes and Employees' Financial Participation," CEP Discussion Papers dp1112, Centre for Economic Performance, LSE.
  14. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  15. Saint-Paul, Gilles, 2004. "Why are European Countries Diverging in their Unemployment Experience?," IDEI Working Papers 269, Institut d'Économie Industrielle (IDEI), Toulouse.
  16. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
  17. Dominique Demougin & Carsten Helm, 2006. "Moral Hazard and Bargaining Power," German Economic Review, Verein für Socialpolitik, vol. 7, pages 463-470, November.
  18. Demougin, Dominique & Helm, Carsten, 2011. "Job matching when employment contracts suffer from moral hazard," European Economic Review, Elsevier, vol. 55(7), pages 964-979.
  19. Brown, Eleanor & Kaufold, Howard, 1988. "Human Capital Accumulation and the Optimal Level of Unemployment Insurance Provision," Journal of Labor Economics, University of Chicago Press, vol. 6(4), pages 493-514, October.
  20. repec:iab:iabzaf:v:40:i:1:p:45-64 is not listed on IDEAS
  21. Jonathan Haskel & Robert Z. Lawrence & Edward E. Leamer & Matthew J. Slaughter, 2012. "Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 119-140, Spring.
  22. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
  23. Jacobi, Lena & Kluve, Jochen, 2007. "Before and after the Hartz reforms: The performance of active labour market policy in Germany," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 40(1), pages 45-64.
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