Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance

32 Pages Posted: 1 Feb 2010

See all articles by Susanne Ek

Susanne Ek

affiliation not provided to SSRN

Bertil Holmlund

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

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Abstract

The paper develops an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matter for wage outcomes. In general, employed members of two-person families receive higher wages than employed singles. The model is applied to a welfare analysis of alternative unemployment insurance systems, recognizing the role of spousal employment as a partial substitute for public insurance. The optimal system involves benefit differentiation based on marital status as well as spousal labor market status. Optimal differentiation yields small welfare gains but gives rise to large wage differentials.

Keywords: job search, wage bargaining, wage differentials, unemployment, unemployment insurance

JEL Classification: J31, J64, J65

Suggested Citation

Ek, Susanne and Holmlund, Bertil, Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance. IZA Discussion Paper No. 4701. Available at SSRN: https://ssrn.com/abstract=1545128

Susanne Ek (Contact Author)

affiliation not provided to SSRN ( email )

Bertil Holmlund

Uppsala University - Department of Economics ( email )

SE-75120 Uppsala
Sweden
+46 18 471 1122 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/holmlund/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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