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Equilibrium Unemployment Insurance
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1999 (English)Report (Other academic)
Abstract [en]

In this paper, we incorporate a positive theory of unemployment insurance into a dynamic overlapping generations model with search-matching frictions and on-the-job learning-by-doing. The model shows that societies populated by identical rational agents, but differing in the initial distribution of human capital across agents, may choose very different unemployment insurance levels in a politico-economic equilibrium. The interaction between the political decision about the level of the unemployment insurance and the optimal search behavior of the unemployed gives rise to a self-reinforcing mechanism which may generate multiple stady-state equillibria. In particular, a European-type steady-state with high unemployment, low employment turnover and high insurance can co-exist with an American-type steady-state with low unemployment, high employment turnover and low unemployment insurance. A calibrated version of the model features two distinct steady-state equilibria with unemployment levels and duration rates resembling those of the U.S. and Europe, respectively.

Place, publisher, year, edition, pages
Stockholm: IIES , 1999. , 57 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 665
Keyword [en]
Comparative Advantage, Employment, Political Equilibrium, Search, Specialization, Unemployment Insurance
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-41090OAI: oai:DiVA.org:su-41090DiVA: diva2:328271
Available from: 2010-07-02 Created: 2010-07-02 Last updated: 2010-07-02Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
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  • vancouver
  • Other style
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  • de-DE
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  • en-US
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  • nn-NB
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Output format
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