 Unemployment compensation and high European unemployment: a reassessment with new benefit indicatorsDavid Howell () and Miriam Rehm Oxford Review of Economic Policy, 2009, vol. 25, issue 1, 60-93 Abstract: Generous unemployment benefits lie at the heart of the conventional explanation for persistent high unemployment. The effects of benefit generosity on work incentives are more ambiguous in a broader behavioural framework in which workers get substantial disutility from unemployment (given income) and know that unemployment has scarring effects in the future. The micro evidence suggests modest effects of changes in generosity, but there are reasons to doubt that the impacts on national unemployment rates are consequential. The empirical case for the orthodox prediction comes from cross-country regressions on the OECD's gross replacement rate (GRR), but the published evidence is mixed, and we find little support in the pattern of annual changes in the GRR and the unemployment rate for OECD countries over the last three decades. We take advantage of new and much improved net replacement indicators from the OECD, which show little correlation with either the GRRs or with unemployment and employment rates. We conclude that the available evidence does not offer compelling support for the conventional view. Copyright 2009, Oxford University Press. Date: 2009 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:oxford:v:25:y:2009:i:1:p:60-93 Access Statistics for this article Oxford Review of Economic Policy is currently edited by Christopher Adam More articles in Oxford Review of Economic Policy from Oxford University Press and Oxford Review of Economic Policy Limited |
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