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How to Finance Unemployment Benefits in an Economy with Search Generated Equilibrium Unemployment

  • Pia Weiss

    (Institute for Economic Policy)

In this paper, the effects of alternatives to finance unemployment benefits on employment and wages are examined in a model with search generated equilibrium unemployment. It is demonstrated that employment improves if a value--added tax is levied, as opposed to a social system contribution, where employees bear part of the contribution. In addition, it is shown that shifting the burden of the contribution to the Social Security system from employers to employees may have negative employment effects if the benefits are not taxed. This effect vanishes if the benefits are taxed.

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File URL: http://128.118.178.162/eps/pe/papers/0103/0103001.pdf
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Paper provided by EconWPA in its series Public Economics with number 0103001.

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Length: 21 pages
Date of creation: 15 Mar 2001
Date of revision:
Handle: RePEc:wpa:wuwppe:0103001
Note: Type of Document - Adobe PDF; prepared on IBM PC - LaTeX; to print on HP; pages: 21 ; figures: included
Contact details of provider: Web page: http://128.118.178.162

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  1. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  2. Christopher Pissarides, 1997. "The impact of employment tax cuts on unemployment and wages : the role of unemployment benefits and tax structure," LSE Research Online Documents on Economics 2332, London School of Economics and Political Science, LSE Library.
  3. Alvin E Roth, 2008. "Axiomatic Models of Bargaining," Levine's Working Paper Archive 122247000000002376, David K. Levine.
  4. Coles, Melvyn G. & Wright, Randall, 1998. "A Dynamic Equilibrium Model of Search, Bargaining, and Money," Journal of Economic Theory, Elsevier, vol. 78(1), pages 32-54, January.
  5. Laszlo Goerke, 2000. "Bismarck versus Beveridge. Flat-Rate and Earnings-Related Unemployment Insurance in a General Efficiency Wage Framework," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 243-, May.
  6. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-55, April.
  7. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  8. Goerke, Laszlo, 1999. "Value-added Tax versus Social Security Contributions," IZA Discussion Papers 55, Institute for the Study of Labor (IZA).
  9. Berman, Eli, 1997. "Help Wanted, Job Needed: Estimates of a Matching Function from Employment Service Data," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S251-92, January.
  10. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  11. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  12. Smith, Eric, 1994. "Taxation in a two-sided search model," Journal of Public Economics, Elsevier, vol. 54(3), pages 423-435, July.
  13. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  14. Goerke, Laszlo, 1998. "Bismarck versus Beveridge: Flat- and earnings-related unemployment insurance in an efficiency wage framework," Discussion Papers, Series I 291, University of Konstanz, Department of Economics.
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