Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium

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. r

Labour protection and informal work: A cross‐national analysis of European countries, 2004–2012

“…where the i and t subscripts stand for individual and time respectively; n it is an indicator function that is equal to 1 if the worker decides to be an informal worker and 0 otherwise; x it is a vector of observed variables capturing sociodemographic and work-related characteristics, as well as social security programmes implemented by the national government; and β is the corresponding 9 Entitlement effects refer to the increase in unemployed workers' search intensity when unemployment benefits are about to run out (Mortensen, 1977;Fredriksson and Holmlund, 2001;Coles andMasters, 2004 and. vector of estimated model coefficients.…”

Business cycles, unemployment insurance, and the calibration of matching models

“…Otherwise there would be a fourth labor market state, employed without benefits, with a lower outside option and thus lower wages. As Coles and Masters (2005) point out, this would drive down wages of new jobs in recessions (when more workers run out of benefits), making unemployment even less volatile. effort, the value (3) of unemployment with benefits is replaced by…”

Estimating Incentive and Welfare Effects of Nonstationary Unemployment Benefits

“…Albrecht and Vroman () and Coles and Masters () also have time‐dependent unemployment payments, but they do not analyze the implications for individual effort. Albrecht and Vroman focus on the equilibrium wage dispersion and inefficient job rejection.…”