A Structural Model of Unemployment Insurance Benefit Effects on the Incidence and Duration of Unemployment

Dale Mortensen

Chapter 3 in Advances in the Theory and Measurement of Unemployment, 1990, pp 57-81 from Palgrave Macmillan

Abstract: Abstract Existing theoretical models of the effects of unemployment insurance (UI) benefits on unemployment typically treat incidence and duration separately. For example, Baily (1977) and Feldstein (1976) argue that the incidence of temporary layoff unemployment increases with UI benefit liberality. Mortensen (1970; 1977) and Burdett (1979) demonstrate that the expected duration of search unemployment increases with the UI benefit payment and the potential duration of benefits. Although both results are well understood in isolation, there seems to be no formal model in the literature that allows for the effects of UI benefits on both layoff incidence and search duration simultaneously. Such a model is constructed and analysed in this paper.

Keywords: Unemployment Insurance; Reservation Wage; Unemployed Worker; Unemployment Spell; Unemployment Duration (search for similar items in EconPapers)
Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-10688-2_3

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DOI: 10.1007/978-1-349-10688-2_3

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