Unemployment Compensation Finance and Aggregate Employment Fluctuations

Franck Malherbet and Olivier L'Haridon

No 3614, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Experience rating which is often treated as a simple adjustment cost is an original feature of the US unemployment benefit system. This Paper extensively addresses the effect of experience rating as an alternative to standard job protection. We provide a simple matching model of unemployment that handles both idiosyncratic and aggregate shocks. In such a framework, we show that experience rating tends to increase labour market performances. Indeed, moving toward an experience rated system tends to stabilize employment. Additionally, for reasonable parameter values average employment and production are increased over the cycle. Therefore, it may be worthwhile to shift standard job protection measures toward a more experience rated system.

Keywords: Matching models; Job protection; Experience rating; Employment fluctuation (search for similar items in EconPapers)
JEL-codes: J23 J38 J41 J64 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (5)

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Working Paper: Unemployment Compensation Finance and Aggregate Employment Fluctuations (2002)
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