Re-entitlement Effects with Duration Dependent Unemployment Insurance in a Stochastic Matching Equilibrium

Melvyn Coles and Adrian Masters

No 189, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: In the context of a standard equilibrium matching framework, this paper considers how a duration dependent unemployment insurance (UI) system affects the dynamics of unemployment and wages in an economy subject to stochastic job-destruction shocks. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle

Keywords: Matching frictions; Unemployment; Duration Dependent UI. (search for similar items in EconPapers)
JEL-codes: J63 J64 J65 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dge and nep-ias
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Citations: View citations in EconPapers (1)

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Journal Article: Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium (2007)
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