Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect

This paper identifies and analyses a new effect related to the cyclical behaviour of labour supply: Entitled-Worker Effect (EWE). is different from well-known Added-Worker (AWE) Discouraged-Worker (DWE). The EWE consequence one most important institutions: unemployment benefit (UB). We develop model with uncertainty about results job-seeking transaction costs linked such search process, showing that kind moral hazard appears. creates incentives for workers produces an additional counter-cyclical pressure on aggregate supply, but foundation AWE. present empirical evidence supporting Spanish case. As forward-looking conclusion, policymakers should rethink their political actions in future as might be overstated, particularly those countries generous UB systems. • research effect: result central institution: benefit. supply. relevance points towards overestimation unemployment. Policy implications are far-reaching, affecting demand management.