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Incentive Contracts and Efficient Unemployment Benefits in a Globalized World

  • 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. Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer, vol. 23(1), pages 291-301, January.
  2. Saint-Paul, Gilles, 2004. "Why are European Countries Diverging in their Unemployment Experience?," CEPR Discussion Papers 4328, C.E.P.R. Discussion Papers.
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  9. Noel Gaston & Douglas Nelson, 2004. "Structural Change and the Labor-market Effects of Globalization," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 769-792, November.
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  18. Dominique Demougin & Carsten Helm, 2006. "Moral Hazard and Bargaining Power," German Economic Review, Verein für Socialpolitik, vol. 7, pages 463-470, November.
  19. Demougin, Dominique & Helm, Carsten, 2011. "Job matching when employment contracts suffer from moral hazard," European Economic Review, Elsevier, vol. 55(7), pages 964-979.
  20. 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.
  21. Boulhol, Herv, 2009. "Do capital market and trade liberalization trigger labor market deregulation?," Journal of International Economics, Elsevier, vol. 77(2), pages 223-233, April.
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  24. 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 119-40, Spring.
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