Optimal unemployment benefit financing scheme: A transatlantic comparison

Julien Albertini and Xavier Fairise ()

No 09-01, Documents de recherche from Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne

Abstract: The aim of this paper is to study the properties of an optimal unemployment benefit financing scheme in the US and in France. We wonder if firms should be taxed in proportion of their layoffs and if such a tax should correspond to a part or all of the fiscal cost induced by a dismissal. The welfare gains generated by reforms of the US and French labor market institutions are evaluated. The US labor market is initially characterized by a flexible dismissal regulation and an experience rating system. We show that making firms more responsible for the cost caused by theirs layoff is welfare enhancing. Concerning the French labor market, we find that a more flexible dismissal regulation combined with an experience rating tax may significantly improve labor market performances. In both cases, the efficient layoff tax is close to the expected fiscal cost of an unemployed worker.

Keywords: DSGE models; matching; firing tax; experience rating (search for similar items in EconPapers)
JEL-codes: E61 E65 J41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009
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