On the Extent of Re-Entitlement Effects in Unemployment Compensation

Laurence Rioux and Javier Ortega

No 5826, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A dynamic labour matching economy is presented, in which the unemployed are either entitled to unemployment insurance (UI) or unemployment assistance (UA), and the employees are either eligible for UI or UA upon future separations. Eligibility for UI requires a minimum duration of contributions and UI benefits are then paid for a limited duration. Workers are risk-averse and wages are determined in a bilateral Nash bargain. As eligibility for UI does not automatically follow from employment, the two types of unemployed workers have different threat points, which delivers equilibrium wage dispersion. Most of the variables and parameters of the model are estimated using the French sample of the European Community Household Panel (1994-2000). We show that extending the UI entitlement improves the situation of all groups of workers and slightly lowers unemployment, while raising UI benefits harms the unemployed on assistance and raises unemployment. Easier eligibility for UI also improves the situation of all groups of workers and favours relatively more the least well-off than longer entitlement. Unifying the French unemployment compensation system would raise both wages and unemployment by around 1.5%. The re-entitlement effect in France lowers by 8% the rise in the wage and by 13% the rise in unemployment following a 10% increase in UI benefits.

Keywords: Unemployment compensation; Matching; Re-entitlement effects (search for similar items in EconPapers)
JEL-codes: J41 J65 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP5826 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: On the extent of re-entitlement effects in unemployment compensation (2010)
Working Paper: On the Extent of Re-Entitlement Effects in Unemployment Compensation (2008)
Working Paper: On the extent of re-entitlement effects in unemployment compensation (2008)
Working Paper: On the Extent of Re-Entitlement Effects in Unemployment Compensation (2007)
Working Paper: On the Extent of Re-entitlement Effects in Unemployment Compensation" (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:5826

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5826

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().