Part-Time Unemployment and Optimal Unemployment Insurance

34 Pages Posted: 7 Mar 2011

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

A significant fraction of the labor force consists of employed workers who are part-time unemployed (underemployed) in the sense that they are unable to work as much as they prefer. This paper develops a search and matching model to study the design of optimal unemployment insurance in an economy with unemployment as well as part-time unemployment. Part-time unemployment provides income insurance and serves as a stepping stone to full-time jobs. Unemployment benefits for part-timers increase the outflow from unemployment to part-time work but reduce the outflow from part-time work to full-time employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate non-negligible welfare gains associated with time limits for unemployment benefits as well as for part-time benefits. The welfare gains from optimal UI are larger when wages are fixed than when they are flexible.

Keywords: job search, part-time unemployment, unemployment insurance

JEL Classification: J64, J65

Suggested Citation

Ek, Susanne and Holmlund, Bertil, Part-Time Unemployment and Optimal Unemployment Insurance. IZA Discussion Paper No. 5540. Available at SSRN: https://ssrn.com/abstract=1778884

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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