On the Design of a European Unemployment Insurance System

Lukas Mayr, Joao Brogueira de Sousa and Ramon Marimon

No 1330, Working Papers from Barcelona School of Economics

Abstract: We study the welfare effects of both existing and counter-factual European unemployment insurance policies using a rich multi-country dynamic general equilibrium model with labour market frictions. The model successfully replicates several salient features of European labor markets, in particular the cross-country differences in the flows between employment, unemployment and inactivity. We find that mechanisms like the recently introduced European instrument for temporary support to mitigate unemployment risks in an emergency (SURE), which allows national governments to borrow at low interest rates to cover expenditures on unemployment benefits, yield sizable welfare gains, contradicting the conventional classical view that costs of business cycles are small. Furthermore, we find that a harmonized benefit system that features a one-time payment of around three quarters of income upon separation is welfare improving in all Eurozone countries relative to the status quo.

Keywords: Unemployment Insurance; labour markets; job creation; job destruction; risksharing (search for similar items in EconPapers)
JEL-codes: E2 J6 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-dge and nep-eec
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Citations: View citations in EconPapers (3)

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Journal Article: On the design of a European Unemployment Insurance System (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1330

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