We use a labor search model with heterogenous households and firms to study the efficacy of a wage subsidy during a pandemic, relative to enhancing unemployment benefits. A large proportion of the economy is forced to shut down, and firms in that sector choose whether to lay off workers or keep them on payroll. A wage subsidy encourages firms to keep workers on payroll, which speeds up labor market recovery after the pandemic ends. However, a wage subsidy can be costlier than enhancing unemployment benefits. If the shutdown is long or profit margins are low, then a wage subsidy is preferable and vice versa. The optimal mixture of policies includes a wage subsidy that covers 90$\%$ of the first $200/week of earnings and expands unemployment benefits to cover all salary up to $275/week. Low-income workers, as well as those in less productive jobs, benefit the most from a wage subsidy.

Unemployment insurance benefits are often extended during recessions. Existing research shows that this policy increases the unemployment rate and the duration of unemployment. But less is known about why these changes occur. I construct a job search model with an endogenous participation decision to quantify the contributions of (i) search effort, (ii) job selectivity, and (iii) labor market participation, to changes in unemployment outcomes. In a model calibrated to the US economy, I show that the increased participation accounts for a large fraction of the increase in the unemployment rate following a permanent extension of benefits. This finding indicates the importance of changes in the participation decision of workers facing extended benefits for the unemployment rate—a mechanism that is understudied and frequently overlooked in the quantitative labor market research exploring the impact of UI policies.

Following the covid-induced lockdowns, many commented on the role the German model of Kurzarbeit could play in reducing unemployment. Other countries emulated the model. Looking at the experiences of Germany, the UK, Sweden and the USA, the article analyses the strengths and weaknesses of short-time working (STW) schemes. It asks whether STW has been well designed to have optimal short and longer run impact. It is quite effective as a short-term palliative, but in longer downturns, its weaknesses come to the fore. It is by no means clear that the UK needs a permanent replacement for the furlough.

Welfare states allocate and redistribute resources across different groups. For the social legitimacy of welfare states, public support of redistributive processes and outcomes is crucial. An important aspect in this context is the deservingness or non-deservingness of benefit recipients from the perspective of those who both financially contribute to the system and potentially benefit from it. We invited a random sample of the German labour force to participate in an online-survey. Using a factorial survey experiment, we described fictitious unemployed persons with different attributes and asked survey participants on the just maximum benefit duration for each particular case. Judgements regarding just benefit durations vary along the criteria of reciprocity, control, attitude and need: Respondents grant longer unemployment benefits to older jobseekers, as well as to jobseekers who became involuntarily unemployed, had stable employment careers, have to care for the elderly or are sole earners in the household.

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.

Despite the increased attention paid to federal-state unemployment insurance (UI) schemes after the Great Recession (2007–2009), research examining the policy characteristics and the underlying logic shaping the social protection provided by a federal-state UI system is limited. Integrating the perspectives of policy design theory, comparative welfare politics, and fiscal welfare, this paper examines the unequal social protection under the American UI system during and after the Great Recession. By using model-based cluster analysis and fixed-effect panel regression models, this paper identifies three distinct UI approaches, i.e. the limited social protection approach, the unbalanced social protection approach, and the balanced social protection approach. The policy choices made by those states that follow the three approaches reflect different mixtures of policy logic, including social protection, economic stabilization, work disincentives, and interstate competition. The overall downward trend in social protection signals that the American UI system is under-prepared for the next economic recession, thereby exposing unemployed workers to the risk of economic insecurity. These findings provide implications for future policy designs aiming to strengthen the social protection of the federal-state UI system.

This article examines the development of a ‘dualised’ welfare regime – generous earnings-related unemployment compensation for ‘insiders’ and residual needs-based social assistance provision for ‘outsiders’ – in China and Brazil, which experienced impressive economic development in recent decades. It argues that such a welfare outcome can partly be accounted for by the ongoing influence of ‘insiders’, which was conditional upon the pace and nature of economic liberalisation reforms and their representation in institutional channels of social policy-making. It also demonstrates that the new social/unemployment assistance schemes for ‘outsiders’ emerged due to both governments’ fear of losing their power in politics; yet, these schemes were designed in a residual way since ‘outsiders’ did not possess the same political resources as ‘insiders’ did. The paper, moreover, draws from the Russian experience (a negative case) to demonstrate that such a dualised welfare outcome did not take place because the ‘insiders’ were weak, owing to a radical and orthodox liberalisation and they did not have access to institutional venues to influence social policy-making process.

The political economy of trade literature argues that the policy of compensating those who lose from trade is an important component of maintaining public support for free-trade, a linkage known as the compensation hypothesis or embedded liberalism thesis. This article tests the causal mechanisms underlying the compensation hypothesis by examining support for trade-related compensation using survey data from the United States. Expectations about the effects of trade strongly predict support for trade-related unemployment insurance, with those who expect to lose more likely to support and those who expect to gain more like to oppose, but has no influence on support for general unemployment insurance despite previous research suggesting it should.

We calculate that the extension of unemployment insurance benefits during downturns has significantly increased the variability of unemployment and vacancies in the United States. Taking this into account reduces the value of leisure necessary to match the wide labor market business cycles experienced in the United States using the Mortensen--Pissarides model. For this calculation, we analyze a version of the model where unemployment insurance benefits not only expire but must be earned with prior employment. With these features, we can calibrate the model to be consistent with unemployment responding strongly to productivity shocks and mildly to changes in unemployment insurance policies. Our preferred calibration predicts that the standard deviation of unemployment since 1945 would have fallen by around 37% if there had not been programs extending unemployment benefits during recessions. We also find that the enactment of the Emergency Unemployment Compensation program in 2008 increased the unemployment rate by 0.5 percentage points.

Before 1936, private insurance against unemployment was mostly run by trade unions. Commercial companies, meanwhile, did not penetrate into this insurance branch, which is probably due to the advantages that trade unions had when dealing with adverse selection and moral hazard problems. Nevertheless, union-based unemployment insurance reached a lower level of development than other private social insurance schemes, like sickness insurance, perhaps because of the financial difficulties that economic crisis involved for unemployment funds. Also, unemployment insurance spread specially among urban and high-wage workers, although coverage rates in Spain were below those of other European countries with higher income levels. However, even in the latter private coverage against unemployment did not reach 10% of the working population. As in other European countries, Spanish unemployment union-funds implemented strict economic incentives to deal with moral hazard, but precisely this hindered the spreading of private unemployment insurance.

The aim of this paper is to study the optimal duration of unemployment benefit entitlement across the business cycle. We analyze whether the entitlement duration should be prolonged in bad and shortened in good times. Because of consumption smoothing, such a countercyclical policy can be welfare-enhancing as long as it does not affect labor market adjustment too severely and/or as long as it can even help to reduce inefficiencies there. If, however, the labor market is already quite inflexible, procyclical behavior may be preferable. In a calibrated dynamic business cycle framework, we find that countercyclical benefit entitlement duration may be preferable in the United States but not in Europe.

This study incorporates the survival analysis of unemployment duration into the insurance pricing framework to measure the fairly-priced premium rate for Taiwan's unemployment insurance (UI) program. Our results suggest that the fair premiums range from 0.2041% to 0.2436% under the 1999-2002 scheme and from 0.1388% to 0.1521% under the 2003-2009 scheme for various possible levels of average unemployment duration in Taiwan, and they are all lower than the current UI premium rate, 1%. This result explains in part why there is a persistent surplus in the UI program. The sensitivity analysis results indicate that the fair premium rate decreases with the hazard rate of exiting from unemployment and increases with the probability of entering into unemployment. The effect of the entering probability is found to be larger than that of the exiting probability. We also provide a wide range of systematic risk coefficient (β) values generated from three alternative methods to measure its impact on fair premium rates and find that the effect of β on premium rates is stronger under the 1999-2002 scheme than that of the 2003-2009 scheme.

Cet article vise à analyser les effets des conditions d'éligibilité à l'assurance chômage sur le taux de chômage d'équilibre et le bien-être dans un modèle de recherche d'emploi avec accumulation de capital et effort de recherche endogène. Trois instruments de politique économique sont considérés: le montant des indemnisations, la durée de versement des prestations et la période de cotisation au régime d'assurance chômage. Nous mon-trons qu'un allongement de la durée de versement accompagné d'une baisse des allocations améliore le bien-être en utilisant de manière plus efficace la capacité d'auto-assurance des chômeurs éligibles.