Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099874 | Journal of Economic Dynamics and Control | 2007 | 20 Pages |
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.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Melvyn Coles, Adrian Masters,