The Determination of Unemployment Benefits

Posted: 10 Oct 2001

See all articles by Rafael Di Tella

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

Robert MacCulloch

Imperial College London - Tanaka Business School

Multiple version iconThere are 2 versions of this paper

Abstract

While much empirical research has been done on the labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. The paper presents a simple model where workers desire insurance against the possibility of unemployment and unemployment benefits increase the unemployment rate. We then conduct, what we believe, is one of the first empirical analyses of the determinants of the parameters of the unemployment benefit system. Using OECD data for 1971-1989, controlling for year and country fixed effects, and controlling for the political colour of the government, we find evidence suggesting that the level of benefits falls when the unemployment rate is high. This is consistent with the tax-effect described in Wright [1986].

JEL Classification: H53, J65

Suggested Citation

Di Tella, Rafael and MacCulloch, Robert, The Determination of Unemployment Benefits. Journal of Labor Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=267358

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States
617-495-5048 (Phone)
617-496-5985 (Fax)

HOME PAGE: http://www.people.hbs.edu/rditella/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert MacCulloch (Contact Author)

Imperial College London - Tanaka Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

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