Benefit reentitlement conditions in unemployment insurance schemes

Abstract

Benefit Reentitlement Conditions in Unemployment Insurance Schemes * Unemployment insurance schemes include conditions on past employment history as part of the eligibility conditions. This aspect is often neglected in the literature which primarily focuses on benefit levels and benefit duration. In a search-matching framework we show that benefit duration and employment requirements are substitute instruments in affecting job search incentives and thus gross unemployment. We analyse the optimal design of the unemployment insurance system (benefit levels, duration and employment requirements) under a utilitarian social welfare function. Simulations show that a higher insurance motive captured by more risk aversion implies higher benefit generosity and more lax employment requirements but also shortened benefit duration.

Job Duration and History-Dependent Unemployment Insurance

“…The latter finding somewhat goes in the opposite direction to standard effects having that search effort increases for unemployed qualified for maximum UIB duration, while it decreases for non-entitled unemployed following stricter requirements on the employment history (see e.g. Andersen et al (2018), Ellermann-Aarslev (2017a), Ellermann-Aarslev (2017b)). However, a lower reservation duration is not equivalent to a higher search effort, as conducting search effort is an investment costly today, whereas deciding on a certain reservation duration is a choice requiring no effort.…”

“…Moreover, the bargaining power of workers may be reduced when unemployment benefits depend on employment history, which therefore makes it more important for the worker to reach an agreement with the firm. Andersen et al (2018) consider the optimal determination of benefit levels, duration, and employment requirements in a DMP search-matching model. However, the issue of job duration 1 is not explicitly addressed in those papers, perhaps because requirements based on the employment histories of unemployed introduce state contingencies or heterogeneities across otherwise identical individuals.…”

Risk aversion and labor behavior determination factors on insurance products

“…Mitman & Rabinovich, (2021) explained that the behavior of the seekers depends on choosing the benefits of insurance in the future as well as the future conditions of the labor market. Governments with policy powers can take advantage of intervention by suggesting insurance, can by way of incentivizing or self-initiative so that the labor market recovers from the crisis.. Andersen et al, (2018) applying employment requirements for eligibility to obtain benefits allows for higher levels of benefits and longer duration, and increased labor market performance. As the need for insurance increases due to higher risk aversion, job requirements become more difficult, but conversely as job requirements become easier without environmental insurance becomes more risky.…”