Benefit Reentitlement Conditions in Unemployment Insurance Schemes

27 Pages Posted: 27 Apr 2015

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Mark Kristoffersen

National Bank of Denmark

Michael Svarer

Aarhus University - Department of Economics and Business Economics; Institute for the Study of Labor (IZA)

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Abstract

Unemployment insurance schemes include conditions on past employment history as part of the eligibility conditions. This aspect is often neglected in the literature which primarily focuses on benefit levels and benefit duration. In a search-matching framework we show that benefit duration and employment requirements are substitute instruments in affecting job search incentives and thus gross unemployment. We analyse the optimal design of the unemployment insurance system (benefit levels, duration and employment requirements) under a utilitarian social welfare function. Simulations show that a higher insurance motive captured by more risk aversion implies higher benefit generosity and more lax employment requirements but also shortened benefit duration.

Keywords: reentitlement effects, unemployment insurance, business cycle

JEL Classification: E32, H3, J65

Suggested Citation

Andersen, Torben M. and Kristoffersen, Mark and Svarer, Michael, Benefit Reentitlement Conditions in Unemployment Insurance Schemes. IZA Discussion Paper No. 8991, Available at SSRN: https://ssrn.com/abstract=2598931

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Mark Kristoffersen

National Bank of Denmark ( email )

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Denmark

Michael Svarer

Aarhus University - Department of Economics and Business Economics ( email )

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Institute for the Study of Labor (IZA)

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