Re-entitlement effects with duration-dependent unemployment insurance in a stochastic matching equilibrium
نویسندگان
چکیده
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. r 2006 Elsevier B.V. All rights reserved. JEL classification: J63; J64; J65; E32
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Re-entitlement E¤ects with Duration Dependent Unemployment Insurance in a Stochastic Matching Equilibrium
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