Indexation Of Unemployment Benefits To Previous Earnings, Employment And Wages

Heer, Burkhard and Morgenstern, Albrecht (May 2000): Indexation Of Unemployment Benefits To Previous Earnings, Employment And Wages. Discussion Papers in Economics 2000-13

Abstract

In most OECD countries, unemployment benefits are tied to individual previous labor earnings. We study the progressivity of this indexation with regard to its effects on employment, output and wages in four equilibrinin models of the labor market keeping the level of unemployment benefits fixed. In the two cases of competitive labor markets and decentralized wage bargaining, employment and output increase, while wages decrease with the degree of indexation. In the model with search unemployment and Nash wage bargaining, all wages, employment and output increase, while die indexation of employirient benefits to previous carnings has no effect in the case of efficiency wages. In addition, our results suggest that a more progressive mdexation of unemployment benefits to labor earnings is wellare enhancing.

• Item Type: Paper
• Keywords: Unemployment Benefits ; Progressive Indexation ; Union Wage-Setting ; Search Unemployment ; Efficiency Wages
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > Macro-Economics
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: H57, M55
• Language: English