In-work benefits and unemployment
In-work benefits are becoming an increasingly relevant labour market policy, gradually expanding in scope and geographical coverage. This paper investigates the equilibrium impact of in-work benefits and contrasts it with the traditional partial equilibrium analysis. We find under which conditions accounting for equilibrium wage adjustments amplifies the impact of in-work benefits on search intensity, participation, employment, and unemployment, compared to a framework in which wages are fixed. We also account for the financing of these benefits and determine the level of benefits necessary to achieve efficiency in a labour market characterized by search externalities. <br><br> Keywords; in-work benefits, search, labour force participation, wage adjustment
Year of publication: |
2010-03-01
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Authors: | Kolm, Ann-Sofie ; Tonin, Mirco |
Institutions: | Economics Division, University of Southampton |
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