Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages

Kenneth Burdett · Randall Wright

129 citations0/0 files storedJournal of Political Economy

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Labor market dynamics and wage inequality Employment, Labor, and Gender Studies Employment and Welfare Studies

Abstract

We analyze two unemployment insurance systems. In one, unemployed workers receive benefits while those on reduced hours do not, as in North America (at least until recently). In the other, short-time compensation is paid to workers on reduced hours, as in Europe. The first system causes inefficient temporary layoffs for some parameters; the latter does not, but implies inefficient hours per worker. Some evidence is presented regarding these effects. Despite policymakers' recent enthusiasm for short-time compensation, the clear implication of this project is that changes should come on the tax, not benefit, side of the system.

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References

1985Indivisible labor and the business cycle 1986Theory ahead of business-cycle measurement 1975Implicit Contracts and Underemployment Equilibria 1976Temporary Layoffs in the Theory of Unemployment 1977On the Theory of Layoffs and Unemployment 2007On Layoffs and Unemployment Insurance 1986The redistributive roles of unemployment insurance and the dynamics of voting

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