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In-Work Benefits and Unemployment

Mirco Tonin and Ann-Sofie Kolm ()

No 5473, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In-work benefits are becoming an increasingly relevant labour market policy, gradually expanding in scope and geographical coverage. This paper investigates the equilibrium impact of in-work benefits and contrasts it with the traditional partial equilibrium analysis. We find under which conditions accounting for equilibrium wage adjustments amplifies the impact of in-work benefits on search intensity, participation, employment, and unemployment, compared to a framework in which wages are fixed. We also account for the financing of these benefits and determine the level of benefits necessary to achieve efficiency in a labour market characterized by search externalities.

Keywords: search; in-work benefits; labour force participation; wage adjustment (search for similar items in EconPapers)
JEL-codes: J21 J38 H24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: 2011-02
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Published in: International Tax and Public Finance, 2011, 18 (1), 74-92

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Journal Article: In-work benefits and unemployment (2011) Downloads
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