We study the role of preferences in the process of unemployment benefit determination. Perhaps surprisingly, survey evidence for the UK suggests that both the employed and unemployed wish to see a more generous level of unemployment benefits.

We present a simple model where unemployment benefits are determined in an economy in which there is endogenous delay in finding a job so that workers desire insurance against the possibility of unemployment.

Why might there be a long-run trade-off between growth and unemployment? In general equilibrium, the returns on the factors of production are interdependent. This paper develops a model where the determination of the wage is central to the evolution of these incentives. The incentive to hire...