scholarly journals A Macroeconomic Approach to Optimal Unemployment Insurance: Theory

2018 ◽  
Vol 10 (2) ◽  
pp. 152-181 ◽  
Author(s):  
Camille Landais ◽  
Pascal Michaillat ◽  
Emmanuel Saez
Keyword(s):  
Labor Market ◽  
Unemployment Insurance ◽  
Job Search ◽  
Correction Term ◽  
Replacement Rate ◽  
Efficient Level ◽  
Matching Models

This paper develops a theory of optimal unemployment insurance (UI) in matching models. The optimal UI replacement rate is the conventional Baily-Chetty replacement rate, which solves the tradeoff between insurance and job-search incentives, plus a correction term, which is positive when an increase in UI pushes the labor market tightness toward its efficient level. In matching models, most wage mechanisms do not ensure efficiency, so tightness is generally inefficient. The effect of UI on tightness depends on the model: increasing UI may raise tightness by alleviating the rat race for jobs or lower tightness by increasing wages through bargaining. (JEL E24, J22, J23, J31, J41, J64, J65)

scholarly journals A Macroeconomic Approach to Optimal Unemployment Insurance: Applications

2018 ◽  
Vol 10 (2) ◽  
pp. 182-216 ◽  
Author(s):  
Camille Landais ◽  
Pascal Michaillat ◽  
Emmanuel Saez
Keyword(s):  
United States ◽  
Sensitivity Analysis ◽  
Labor Market ◽  
Empirical Evidence ◽  
Unemployment Insurance ◽  
Correction Term ◽  
The United States ◽  
Replacement Rate

In the United States, unemployment insurance (UI) is more generous when unemployment is high. This paper examines whether this policy is desirable. The optimal UI replacement rate is the Baily-Chetty replacement rate plus a correction term measuring the effect of UI on welfare through labor market tightness. Empirical evidence suggests that tightness is inefficiently low in slumps and inefficiently high in booms, and that an increase in UI raises tightness. Hence, the correction term is positive in slumps but negative in booms, and optimal UI is indeed countercyclical. Since there remains some uncertainty about the empirical evidence, the paper provides a thorough sensitivity analysis. (JEL E24, E32, J64, J65)

scholarly journals Fiscal Externalities and Optimal Unemployment Insurance

2017 ◽  
Vol 9 (4) ◽  
pp. 281-312 ◽  
Author(s):  
Nicholas Lawson
Keyword(s):  
Unemployment Insurance ◽  
Job Search ◽  
Government Spending ◽  
Negative Impact ◽  
Common Finding ◽  
Search Model ◽  
Replacement Rate ◽  
Sufficient Statistics ◽  
Optimal Replacement ◽  
Fiscal Externalities

A common finding of the optimal unemployment insurance (UI) literature is that the optimal replacement rate is around 50 percent; however, a key assumption is that UI is the only government spending activity. I show that optimal UI levels may be dramatically reduced when UI is a small part of overall spending: the negative impact of UI on income tax revenues implies added welfare costs, a mechanism that I call a fiscal externality. Using both a standard calibrated structural job search model and a “sufficient statistics” method, I find that the optimal replacement rate is zero when fiscal externalities are incorporated. (JEL E24, H24, J64, J65)

scholarly journals Evidence on Rule Manipulation and Moral Hazard in the Brazilian Unemployment Insurance Program

2019 ◽  
Vol 8 (1) ◽  
pp. 67
Author(s):  
Gibran Da Silva Teixeira ◽  
Giácomo Balbinotto Neto ◽  
Pedro Henrique Soares Leivas
Keyword(s):  
Labor Market ◽  
Length Of Stay ◽  
Moral Hazard ◽  
Empirical Analysis ◽  
Unemployment Insurance ◽  
Job Search ◽  
Regression Discontinuity ◽  
Insurance Program ◽  
Using Data ◽  
National Labor Market

This article aims to examine the existence of rule manipulation and moral hazard in the Brazilian Unemployment Insurance Program. For empirical analysis, the rule manipulation test by Cattaneo, Janson and Ma (2016) was used, as well as fuzzy and sharp regression discontinuity. The data was built using data from the National Employment and Unemployment Survey from January 2008 to June 2014 due to the greater homogeneity of the rules for benefit access. Based on the results, the program is an influence on the length of employment of Brazilian workers given the existence of rule manipulation, assessed by the length of stay in the last job. Furthermore, it was found that heads of families and their children were less likely to search for employment. This findings were corroborated when data from the program beneficiaries only was assessed, showing a lower job search probability, between -21.80 p.p. and -15.08 p.p. for the children, and between -39.40 p.p. and -28.50 p.p. for the heads of families. Thus, it is possible to confirm the existence of both rule manipulation the access of the program, as well as moral hazard, which points to the need to restructure the program, and above all, have less influence on the national labor market.

scholarly journals Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Susanne Ek ◽  
Bertil Holmlund
Keyword(s):  
Labor Market ◽  
Marital Status ◽  
Unemployment Insurance ◽  
Job Search ◽  
Wage Bargaining ◽  
Equilibrium Search ◽  
Market Status ◽  
Spousal Labor ◽  
Wage Outcomes

Abstract In this paper we develop an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matters for wage outcomes. In general, employed members of two-person families receive higher wages than employed singles. The model is applied to a welfare analysis of alternative unemployment insurance systems, recognizing the role of spousal employment as a partial substitute for public insurance. The optimal system involves benefit differentiation based on marital status as well as spousal labor market status.

scholarly journals Race and Networks in the Job Search Process

2019 ◽  
Vol 84 (6) ◽  
pp. 983-1012 ◽  
Author(s):  
David S. Pedulla ◽  
Devah Pager
Keyword(s):  
Social Networks ◽  
Labor Market ◽  
African Americans ◽  
Racial Disparities ◽  
Job Search ◽  
Search Process ◽  
Job Seekers ◽  
Employment Opportunities ◽  
Black And White ◽  
Job Offers

Racial disparities persist throughout the employment process, with African Americans experiencing significant barriers compared to whites. This article advances the understanding of racial labor market stratification by bringing new theoretical insights and original data to bear on the ways social networks shape racial disparities in employment opportunities. We develop and articulate two pathways through which networks may perpetuate racial inequality in the labor market: network access and network returns. In the first case, African American job seekers may receive fewer job leads through their social networks than white job seekers, limiting their access to employment opportunities. In the second case, black and white job seekers may utilize their social networks at similar rates, but their networks may differ in effectiveness. Our data, with detailed information about both job applications and job offers, provide the unique ability to adjudicate between these processes. We find evidence that black and white job seekers utilize their networks at similar rates, but network-based methods are less likely to lead to job offers for African Americans. We then theoretically develop and empirically test two mechanisms that may explain these differential returns: network placement and network mobilization. We conclude by discussing the implications of these findings for scholarship on racial stratification and social networks in the job search process.

Parental leave length, social norms, and female labor market re-entry frictions

2018 ◽  
Vol 39 (4) ◽  
pp. 600-620 ◽  
Author(s):  
Vojtech Bartoš ◽  
Barbara Pertold-Gebicka
Keyword(s):  
Labor Market ◽  
Social Norms ◽  
Job Search ◽  
Social Norm ◽  
Parental Leave ◽  
Human Resource Managers ◽  
Content Type ◽  
Job Applicant ◽  
Employment Gaps ◽  
The Difference

Purpose The purpose of this paper is to identify the role of employers in creating employment gaps among women returning to the labor market after parental leaves of different durations. Design/methodology/approach The authors use a controlled correspondence field experiment that orthogonally manipulates parental leave length and the quality of fictitious female job candidates. The experiment is complemented with a survey among human resource managers. Findings High-quality candidates receive more interview invitations when applying after a short parental leave, while low-quality (LQ) candidates receive more interview invitations when applying after a typical three years long parental leave. Survey results suggest that the difference in invitations between short and typical leave treatments is driven by a social norm that mothers should stay home with children younger than three. Productivity gains from employing a LQ job applicant with a shorter career break might not be high enough to outweigh the adverse social norm effect. Social implications The presented results point toward the strong effect of prevailing social norms on job search prospects of women returning to the labor market after parental leave. Originality/value A correspondence experiment has not been used before to study the relationship between time spent on leave and the labor market prospects of mothers. It also extends research on social norms to the domain of hiring decisions.

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