Duration Dependent UI Payments in a Model of Equilibrium Unemployment
نویسندگان
چکیده
A dynamically consistent model of equilibrium unemployment when UI payments are duration dependent is developed. The main market distortion is a moral hazard problem: the government does not observe job o¤ers. Hence, UI payments put unemployed workers in a better bargaining position which directly a¤ects equilibrium wage determination. Simulations ...nd that shortening the duration of UI payments signi...cantly reduces wages, unemployment and long-term unemployment. Skill decay during spells of joblessness, is shown to amplify these macro-economic e¤ects.
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