Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161842
Authors: 
Aloi, Marta
Lloyd-Braga, Teresa
Leite-Monteiro, Manuel
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6403
Abstract: 
We consider an economy characterised by involuntary unemployment among low skilled workers, and investigate the implications for employment and income of welfare schemes often advocated as less distortionary. We show that reducing unemployment benefits in favour of income subsidies (social benefits) reduces employment in general equilibrium and also the income of low skilled workers, for not too high distortions in the labour market. Furthermore, it leads to a higher tax burden and a welfare deterioration. To support employment, we suggest that systems grounded in contribution-based unemployment insurance schemes are to be preferred and strengthened.
Subjects: 
unemployment benefits
social benefits
taxes
unions
employment
JEL: 
H20
I38
J65
Document Type: 
Working Paper

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