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Front-loading the Payment of Unemployment Benefits

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  • Etienne Lalé

Abstract

We study the effects of front-loading the payment of unemployment benefits in an equilibrium matching framework with precautionary savings. Front-loading the benefit system trades off fewer means to smooth consumption at long unemployment durations for improved insurance upon job loss. In the United States where jobless spells are typically frequent but short, we find that front-loading the benefit system yields significant welfare gains for new benefit recipients. The gains are lower in the aggregate, but are not completely offset by general equilibrium effects. Comparison with a search effort model shows that the welfare figures are not specific to matching frictions.

Suggested Citation

  • Etienne Lalé, 2014. "Front-loading the Payment of Unemployment Benefits," Bristol Economics Discussion Papers 15/651, School of Economics, University of Bristol, UK, revised 16 Nov 2015.
    • Handle: RePEc:bri:uobdis:15/651
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment Insurance; Precautionary Savings; Labor-Market Frictions; Welfare Effect.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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