Macroeconomic Determinants of Equilibrium Unemployment Insurance
Francisco Galrao Carneiro
The World Bank
João Ricardo Faria
University of Texas at Dallas - Department of Economics & Finance
Labour: Review of Labour Economics and Industrial Relations, Vol. 15, No. 3, 2001
This paper proposes a new modeling strategy as regards the definition of an optimal level of unemployment benefits. While the traditional methodology privileges labor market equilibrium to derive optimal employment, wage and unemployment benefit levels, we present a model in which the optimal level of unemployment benefits is a function of the government's macroeconomic objectives in terms of inflation and output fluctuations. In a second stage, the model allows for the investigation of unemployment insurance effects on labor market equilibrium.
Keywords: Macroeconomic Constraints, Unemployment Insurance, Collective Bargaining, Trade Union Objectives
JEL Classification: H30, J33, J51Accepted Paper Series
Date posted: January 26, 2002
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