Can an Unemployment Insurance System Generate Multiple Natural Rates?

Guillaume Rocheteau

International Tax and Public Finance, 1999, vol. 6, issue 3, 379-387

Abstract: This article studies some macroeconomic consequences of the financing of an unemployment insurance scheme. Under a balanced-budget rule, when both taxes and unemployment benefits are proportional to wages, the existence of multiple natural rates of unemployment is a generic property of the matching model. Government can lead the economy to a high equilibrium by fixing the rate of tax on wages and then setting the replacement ratio so that its expenditure matches its receipts. Copyright Kluwer Academic Publishers 1999

Keywords: matching model; multiple equilibria; unemployment (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1023/A:1008759602591

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