Kiel Working Papers, Kiel Institute for World Economics
No 1498:
Business Cycle Dependent Unemployment Insurance
Torben M. Andersen and Michael Svarer
Abstract: The consequences of cylical contingencies in unemployment
insurance systems are considered in a search-matching model allowing for
shifts between “good” and “bad” states of nature. An argument for state
contingencies is that insurance arguments are stronger and incentive
effects weaker in "bad" than in "good" states of nature. We con.rm this and
show that cyclically dependent benefit levels not only provide better
insurance but may have structural effects implying that the structural
(average) unemployment rate decreases, although the variability of
unemployment may increase
41 pages, March 2009
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