Unemployment insurance and the business cycle: prolong benefit entitlements in bad times?

Stéphane Moyen and Nikolai Stähler

No 2009,30, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: The aim of this paper is to study the optimal duration of unemployment benefit entitlement duration across the business cycle. We wonder if the entitlement duration should be prolonged in bad and shortened in good times. Because of consumption smoothing, such a countercyclical policy can be welfare-enhancing as long as it does not affect labor market adjustment too severely or even helps to reduce inefficiencies there. If, however, the labor market is quite inflexible already, procyclical behavior may be preferable. In a calibrated dynamic business cycle framework, we find that countercyclical benefit entitlement duration may be preferable in the US but not in Europe.

Keywords: Unemployment insurance; entitlement duration; business cycle (search for similar items in EconPapers)
JEL-codes: E32 E62 G00 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:200930

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