Bismarck versus Beveridge: Flat- and earnings-related unemployment insurance in an efficiency wage framework

Laszlo Goerke

No 291, Discussion Papers, Series I from University of Konstanz, Department of Economics

Abstract: A higher unemployment compensation increases the incentive to shirk in efficiency wage models. If there is a stronger dependence of unemployment benefits on current earnings, these incentives will be reduced. An unemployment insurance with earnings-related benefits is thus characterised by higher employment than one with flat-rate benefits. It is investigated under which conditions this advantage persists in the longer term when financial constraints such as an ex-post constant level of benefits, a cash hmit or a balanced budget rule apply, or when firms are constrained to zero profits.

Keywords: balanced budget; cash limit; earnings-related benefits; efficiency wages; flat-rate benefits; long-run; unemployment insurance (search for similar items in EconPapers)
JEL-codes: H24 H25 J32 J41 J65 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (4)

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