Federal unemployment reinsurance and local labor-market policies

Marek Ignaszak (), Philip Jung () and Keith Kuester
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Marek Ignaszak: Goethe University Frankfurt, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt, Germany,

No 40, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between moral hazard and insurance. Calibrating the economy to a stylized European Monetary Union, we find notable welfare gains if the federal scheme's payouts take the member states' past unemployment level as a reference point. Member states' control over policies other than unemployment benefits can limit generosity during the transition phase.

Keywords: Unemployment reinsurance; labor-market policy; fiscal federalism; search and matching (search for similar items in EconPapers)
JEL-codes: E24 E32 E62 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2020-11
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_040_2020.pdf First version, 2020 (application/pdf)

Related works:
Working Paper: Federal unemployment reinsurance and local labor-market policies (2020)
Working Paper: Federal Unemployment Reinsurance and Local Labor-Market Policies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:040

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