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Bismarck versus Beveridge: Flat- and earnings-related unemployment insurance in an efficiency wage framework

  • Goerke, Laszlo

A higher unemployment compensation increases the incentive to shirk in efficiency wage models. If there is a stronger dependence of unemployment benefits on current earnings, these incentives will be reduced. An unemployment insurance with earnings-related benefits is thus characterised by higher employment than one with flat-rate benefits. It is investigated under which conditions this advantage persists in the longer term when financial constraints such as an ex-post constant level of benefits, a cash hmit or a balanced budget rule apply, or when firms are constrained to zero profits.

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Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series I with number 291.

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Date of creation: 1998
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Handle: RePEc:zbw:kondp1:291
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  1. Holmlund, Bertil & Lundborg, Per, 1996. "Wage Bargaining, Union Membership, and the Organization of Unemployment Insurance," Working Paper Series 1996:17, Uppsala University, Department of Economics.
  2. Agell, Jonas & Lundborg, Per, 1992. "Fair wages, involuntary unemployment and tax policies in the simple general equilibrium model," Journal of Public Economics, Elsevier, vol. 47(3), pages 299-320, April.
  3. Leslie, Derek, 1985. "The Economics of Cash Limits as a Method of Pay Determination," Economic Journal, Royal Economic Society, vol. 95(379), pages 662-78, September.
  4. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  5. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  6. Pisauro, Giuseppe, 1991. "The effect of taxes on labour in efficiency wage models," Journal of Public Economics, Elsevier, vol. 46(3), pages 329-345, December.
  7. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  8. Michael Hoel, 1990. "Efficiency wages and income taxes," Journal of Economics, Springer, vol. 51(1), pages 89-99, February.
  9. Winter-Ebmer, Rudolf, 1996. "Potential Unemployment Benefit Duration and Spell Length: Lessons from a Quasi-experiment in Austria," CEPR Discussion Papers 1534, C.E.P.R. Discussion Papers.
  10. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
  11. Hey, John D. & Mavromaras, Kostas Gr., 1981. "The effect of unemployment insurance on the riskiness of occupational choice," Journal of Public Economics, Elsevier, vol. 16(3), pages 317-341, December.
  12. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.
  13. Goerke, Laszlo, 1997. "An Open Shop, Wage Bargaining, and Taxation--A Note," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 651-57, October.
  14. 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.
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