Incentive Contracts and Efficient Unemployment Benefits

Dominique Demougin () and Carsten Helm

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Several European countries have reformed their labor market institutions. Incentive effects of unemployment benefits have been an important aspect of these reforms. We analyze this issue in a principal-agent model, focusing on unemployment levels and labor productivity. In our model, a higher level of unemployment benefits improves the worker's position in wage bargaining, leading to stronger effort incentives and higher output. However, it also reduces incentives for labor market participation. Accordingly, there is a trade-off. We analyze how changes in the economic environment such as globalization and better educated workers affect this trade-off.

JEL-codes: D82 E24 J41 J65 (search for similar items in EconPapers)
Date: 2009
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/77456/
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Published in Darmstadt Discussion Papers in Economics . 191 (2009)

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Related works:
Working Paper: Incentive Contracts and Efficient Unemployment Benefits (2009)
Working Paper: Incentive contracts and efficient unemployment benefits (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:77456

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