Bismarck versus Beveridge: Which Unemployment Compensation System is More Prone to Labor Market Shocks?
University of Hohenheim; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 358
Based on a model with imperfectly competitive labor and product markets the real consequences of labor market shocks for economies with either an earnings-related or flat-rate unemployment compensation system are considered. A distinctive feature of the analysis is the comparison of both unemployment compensation systems in a two-country setting. It is demonstrated that the performance of a system with earnings-related or flat-rate unemployment benefits depends on whether the labor market shock is provoked in the home country or originates from abroad. We also point out how our results extend to two-tier unemployment compensation systems which differ with respect to the relative importance of earnings-related and flat-rate benefits.
Number of Pages in PDF File: 35
Keywords: Earnings-Related Benefits, Flat-Rate Benefits, Unemployment, Open Economy, Monopolistic Competition, Wage Bargaining
JEL Classification: E24, F41, J23, J51, J65working papers series
Date posted: September 14, 2001
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