Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages

Kenneth Burdett and Randall Wright

Journal of Political Economy, 1989, vol. 97, issue 6, 1479-96

Abstract: The authors analyze two unemployment insurance systems. In one, unemployed workers receive benefits, while those on reduced hours do not, as in North America (at least until recently). In the other, short-time compensation is paid to workers on reduced hours, as in Europe. The first system causes inefficient temporary layoffs for some parameters; the latter does not, but implies inefficient hours per worker. Some evidence is presented regarding these effects. Despite policymakers' recent enthusiasm for short-time compensation, the clear implication of this project is that changes should come on the tax, not the benefit, side of the system. Copyright 1989 by University of Chicago Press.

Date: 1989
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