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Title:Incentive contracts and efficient unemployment benefits PDF Logo
Authors:Demougin, Dominique M.
Helm, Carsten
Issue Date:2009
Series/Report no.:CESifo working paper 2670
Abstract:Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher level of unemployment benefits improves the works 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 works affect this trade-off.
Subjects:unemployment benefits
incentive contracts
Nash bargaining
moral hazard
globalisation
JEL:J65
D82
J41
E24
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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