Unemployment compensation under partial program coverage

Tali Regev

Labour Economics, 2012, vol. 19, issue 6, 888-897

Abstract: More than half of the unemployed in the U.S. are not covered by unemployment insurance. For them the provision of employment-dependent UI creates an additional benefit from work: future UI eligibility. This paper explores the overall and distributional effects of providing unemployment compensation under partial coverage. I extend a standard search model to accommodate eligible and non-eligible workers, where eligibility status is determined by previous separation history. While the effect of unemployment benefits on unemployment duration and post unemployment wages is theoretically ambiguous, a calibration of the model to the U.S. economy shows that unemployment benefits raise the unemployment rate. In addition I show that wage gaps and unemployment duration differentials between the eligible and non-eligible exist and are larger when layoffs are high.

Keywords: Unemployment insurance; Unemployment compensation; Insurance eligibility; Partial coverage (search for similar items in EconPapers)
JEL-codes: J31 J65 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:19:y:2012:i:6:p:888-897

DOI: 10.1016/j.labeco.2012.09.002

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