Federal Unemployment Reinsurance and Local Labor-Market Policies

Marek Ignaszak (marek.ignaszak@hof.uni-frankfurt.de), Philip Jung (philip.jung@tu-dortmund.de) and Keith Kuester
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Marek Ignaszak: Goethe University Frankfurt

No 13886, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: 64 pages
Date: 2020-11
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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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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