Citation

Discussion Paper Details

Please find the details for DP7334 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Business Cycle Dependent Unemployment Insurance

Author(s): Torben M Andersen and Michael Svarer

Publication Date: June 2009

Keyword(s): business cycle, incentives, insurance and unemployment benefits,

Programme Area(s): Labour Economics

Abstract: The consequences of business cycle contingencies in unemployment insurance systems are considered in a search-matching model allowing for shifts between "good" and "bad" states of nature. We show that not only is there an insurance argument for such contingencies, but also an incentive argument. If benefits are less distortionary in a recession than a boom, it follows that countercyclical benefits reduce average distortions compared to state independent benefits. We show that optimal benefits are state contingent and tend to reduce the structural (average) unemployment rate, although the variability of unemployment may increase.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7334

Bibliographic Reference

Andersen, T and Svarer, M. 2009. 'Business Cycle Dependent Unemployment Insurance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7334