Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76093
Authors: 
Heer, Burkhard
Year of Publication: 
2002
Series/Report no.: 
CESifo Working Paper 747
Abstract: 
In most OECD countries, unemployment benefits are tied to individual previous labor earnings. We study the progressivity of this indexation with regard to its effects on employment, output, and welfare in a calibrated general equilibrium model with search unemployment. Employment varies endogenously on both the intensive margin and the extensive margins as agents choose their labor supply (if employed) or their search effort (if unemployed) in order to optimize life-time utility. Compared to the case of lump-sum unemployment compensation, a system of insurance payments that are related to past contributions results in higher output and welfare. The effects on employment are negligible as employed workers rather accumulate more savings than to supply additional work in order to insure against the loss of employment.
Subjects: 
earnings-related unemployment benefits
search unemployment
computable general equilibrium
overlapping generations
Document Type: 
Working Paper

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