Should unemployment benefits decrease with unemployment spell ?

Pierre Cahuc and Etienne Lehmann ()

CEPREMAP Working Papers (Couverture Orange) from CEPREMAP

Abstract: In this paper, we investigate whether unemployment benefits should decrease with the unemployment spell in a model where both job search intensity and wages are endogenous. Wages are set by collective agreements bargained by insiders. It is shown that a more declining time sequence of unemployment benefits leads to wage increases when the tax rate is given. Such an effect may imply an increase in unemployment and counteracts the response of job search intensity that can be found in standard job search models with a given wage distribution. Calibration exercises suggest that it costs twice more in terms of welfare loss for the long-term unemployed workers to reduce the unemployment rate of one percent when wages are endogenous than in the standard job search model.

JEL-codes: H29 J23 J38 J41 J64 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1999
New Economics Papers: this item is included in nep-dge, nep-lab and nep-pbe
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Citations: View citations in EconPapers (4)

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Journal Article: Should unemployment benefits decrease with the unemployment spell? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:cepmap:9916

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