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The Unemployment Benefit System: a Redistributive or an Insurance Institution?

  • Daniel Cardona


  • Fernando Sánchez-Losada

We analyze the effects of the unemployment benefit system on the economy. In particular, we focus on both the tax structure and the unemployment benefits composition. We show that if the unemployment benefit system is only paid by firms, then employment and production are maximized. Moreover, the way the government contemplates the unemployment benefit system, either as a redistributive or as an insurance institution, is crucial for the dynamics and the equilibria of the economy.

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Paper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 8.

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Date of creation: Dec 2004
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Handle: RePEc:ubi:deawps:8
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  1. Manning, Alan, 1993. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," Economic Journal, Royal Economic Society, vol. 103(416), pages 98-118, January.
  2. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
  3. Holm, Pasi & Honkapohja, Seppo & Koskela, Erkki, 1994. "A monopoly-union model of wage determination with capital and taxes: An empirical application to the Finnish manufacturing," European Economic Review, Elsevier, vol. 38(2), pages 285-303, February.
  4. Koskela, Erkki & Schob, Ronnie, 1999. "Does the composition of wage and payroll taxes matter under Nash bargaining?," Economics Letters, Elsevier, vol. 64(3), pages 343-349, September.
  5. Jorg, LINGENS & Klaus, WAELDE, 2005. "Pareto-Improving Unemployment Policies," Discussion Papers (ECON - Département des Sciences Economiques) 2005033, Université catholique de Louvain, Département des Sciences Economiques.
  6. Pierre M. PICARD, 2001. "Optimal Employment Subsidies to Heterogeneous Workers: Unemployment-Trap, Job-Additionality and Tax Rates," Annals of Economics and Statistics, GENES, issue 62, pages 97-125.
  7. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.
  8. Fredriksson, Peter & Holmlund, Bertil, 1998. "Optimal Unemployment Insurance in Search Equilibrium," Working Paper Series 1998:2, Uppsala University, Department of Economics.
  9. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
  10. Oswald, Andrew J., 1993. "Efficient contracts are on the labour demand curve : Theory and facts," Labour Economics, Elsevier, vol. 1(1), pages 85-113, June.
  11. Creedy, John & McDonald, Ian M, 1991. "Models of Trade Union Behaviour: A Synthesis," The Economic Record, The Economic Society of Australia, vol. 67(199), pages 346-59, December.
  12. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  13. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August.
  14. Daniel Cardona & Fernando Sánchez-Losada, 2006. "Unions, qualification choice, and output," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 50-76, January.
  15. Thomas Beissinger & Hartmut Egger, 2004. "Dynamic wage bargaining if benefits are tied to individual wages," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 437-460, July.
  16. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  17. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  18. Luis A. GIL-ALANA, 2001. "Estimation of Fractionally ARIMA Models for the UK Unemployment," Annals of Economics and Statistics, GENES, issue 62, pages 127-137.
  19. Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
  20. Albrecht, James W & Vroman, Susan B, 1999. "Unemployment Compensation Finance and Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 141-67, January.
  21. Koskela , Erkki, 2001. "Labour taxation and employment in trade union models: A partial survey," Research Discussion Papers 19/2001, Bank of Finland.
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