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JOB DURATION AND HISTORY-DEPENDENT UNEMPLOYMENT INSURANCE

Published online by Cambridge University Press:  17 December 2020

Torben M. Andersen  and
Christian Ellermann-Aarslev
Torben M. Andersen*
Affiliation:
Aarhus University, CEPR, CESifo and IZA
Christian Ellermann-Aarslev
Affiliation:
Aarhus University and Danmarks Nationalbank
*
Address correspondence to: Department of Economics and Business Economics, Aarhus University, Fuglesangs Allé 4, DK-8210 Aarhus V., Denmark. e-mail: [email protected]. Phone: +45 8716 5557.
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Abstract

Unemployment insurance schemes typically include eligibility conditions comprising the employment history prior to becoming unemployed, an aspect largely neglected in the literature. We develop an analytically tractable matching model including such contingencies. Unemployed determine reservation durations for jobs to be acceptable, and stronger employment histories increase reservation durations. This creates a stratification among unemployed; unemployed with short employment histories accept short-term jobs, while those with a strong employment history aims for jobs with a longer duration. A trade-off arises between the employment level and the matching quality in terms of job duration; a stronger reward to employment histories reduces employment, but improves match quality (more long-term jobs). Numerical simulations show that the distribution between short- and long-term jobs is significantly affected by history dependencies in benefits levels and duration. The optimal utilitarian policy is shown to include contingencies based on employment histories of the unemployed.

Keywords

Unemployment InsuranceEntitlement ConditionsEmployment HistoryJob Search
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 6 , September 2022 , pp. 1444 - 1482
Copyright
© Cambridge University Press 2020

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Footnotes

The viewpoints and conclusions stated are the responsibility of the authors and do not necessarily reflect the views of Danmarks Nationalbank. We gratefully acknowledge constructive comments from Rune Vejlin, Birthe Larsen, Ann-Sofie Kolm, and referees and an associate editor.

References

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