The paper presents a tractable general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms offer wages, and possibly sick...

Self-employed individuals have arguably greater opportunities than wage earners to underreport their incomes. The incentives for underreporting should be especially strong in an economy with generally high taxes. This paper uses recent income and expenditure data to examine the extent of...

In June 1995, the Swedish parliament decided to cut the replacement rate in unemployment insurance from 80 percent to 75 percent, a change that took effect on January 1, 1996. This paper examines how this change affected job finding rates among unemployed insured individuals. To identify the...

The European Union has recently proposed sectoral tax differentiation as a policy to fight unemployment. The member countries are allowed to reduce the VAT rates on goods and services that are particularly labor intensive and price elastic. The paper provides a theoretical analysis of the...

Conventional models of equilibrium unemployment typically imply that proportional taxes on labor earnings are neutral with respect to unemployment as long as the tax does not affect the replacement rate provided by unemployment insurance, i.e., unemployment benefits relative to after-tax...

This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is...

Sweden has experienced a substantial increase in temporary work over the 1990s, with most of the rise occurring during a severe macroeconomic recession with mass unemployment. By the early 1990s, workers on fixed-term contracts accounted for 10 percent of the number of employees; by the end of...

The paper develops a two-sector general equilibrium search model where 'goods' are produced exclusively in the market and 'services' are produced both in the market and within the households. We use the model to examine how unemployment and welfare are affected by labor taxes in general and...

This paper provides a review of the recent literature on how incentives in unemployment insurance (UI) can be improved. We are particularly concerned with three instruments, viz. the duration of benefit payments (or more generally the time sequencing of benefits), monitoring in conjunction with...

By international standards, unemployment in Sweden remained remarkably low throughout the 1970s and the 1980s. In the early 1990s, however, the unemployment rate skyrocketed and hit double-digit levels. Unemployment remained high for several years but exhibited a marked fall from 1997 and...