DP2541 Measuring the Equilibrium Effects of Unemployment Benefits Dispersion

Author(s): Gerard van den Berg, G Ridder, Aico van Vuuren
Publication Date: August 2000
Keyword(s): Benefit Levels, Equilibrium Search, Minimum Wages, Wages, Welfare
JEL(s): C41, E24, J31, J64
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2541

We analyse the impact of unemployment benefits and minimum wages using an equilibrium search model, which allows for dispersion of benefits and productivity levels, job-to-job transitions, and structural and frictional unemployment. The estimation method uses readily available aggregate data on marginal distributions of unemployment durations as well as wages and benefit levels. Different causes of structural and frictional unemployment are investigated. We investigate the efficiency of the imposition of a single benefit level for all household types and the introduction of an Earned Income Tax Credit.