Federal Unemployment Reinsurance and Local Labor-Market Policies

65 Pages Posted: 2 Dec 2020

See all articles by Marek Ignaszak

Marek Ignaszak

Goethe University Frankfurt

Philip Jung

Technical University of Dortmund

Keith Keuster

University of Bonn

Multiple version iconThere are 2 versions of this paper

Date Written: November 2020


Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between moral hazard and insurance. Calibrating the economy to a stylized European Monetary Union, we find notable welfare gains if the federal scheme's payouts take the member states' past unemployment level as a reference point. Member states' control over policies other than unemployment benefits can limit generosity during the transition phase.

JEL Classification: E24, E32, E62

Suggested Citation

Ignaszak, Marek and Jung, Philip and Kuester, Keith, Federal Unemployment Reinsurance and Local Labor-Market Policies (November 2020). CEPR Discussion Paper No. DP15465, Available at SSRN: https://ssrn.com/abstract=3737598

Marek Ignaszak (Contact Author)

Goethe University Frankfurt

Gr├╝neburgplatz 1
Frankfurt am Main, 60323

Philip Jung

Technical University of Dortmund ( email )

Emil-Figge-Stra├če 50
Dortmund, 44227

Keith Kuester

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics