Employment and Welfare Effects of a Two-Tier Unemployment Compensation System

Burkhard Heer

No 297, CESifo Working Paper Series from CESifo

Abstract: In many OECD countries, e.g. in Germany, France, or the UK, unemploy-ment compensation consists of unemployment insurance and unemployment assistance. Unemployment assistance is provided subsequent to the expiration of entitlement to unemployment insurance and is lower. The effects of this two-tier unemployment compensation system are studied in a general equilibrium job search model with endogenous distributions of in-come, wealth, and employment which is calibrated with regard to the charac-teristics of the German economy. Our results are as follows: i) employment is a decreasing function of both unemployment insurance and unemployment assistance. ii) Savings are (not) a monotone increasing function of unemployment insurance (unemployment assistance payments). iii) Optimal unemployment compensation payments are found to be a decreasing function over time.

Keywords: Unemployment compensation; search unemployment; general equilibrium; overlapping generations (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Employment and Welfare Effects of a Two-Tier Unemployment Compensation System (2003)
Working Paper: EMPLOYMENT AND WELFARE EFFECTS OF A TWO-TIER UNEMPLOYMENT COMPENSATION SYSTEM (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_297

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