Benefit Reentitlement Conditions in Unemployment Insurance Schemes

36 Pages Posted: 26 Mar 2018

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Mark Kristoffersen

National Bank of Denmark

Michael Svarer

Aarhus University - Department of Economics and Business Economics; Institute for the Study of Labor (IZA)

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Date Written: March 2018

Abstract

The past employment history - employment requirements - is part of the eligibility conditions for unemployment insurance in most western countries. In a standard search-matching model, we show how employment requirements strengthen the reentitlement effect and thereby changes the trade-off between insurance and incentives in the design of the optimal insurance scheme. Deploying employment requirements for benefit eligibility may thus allow for both higher benefit levels and longer duration, and yet labor market performance is improved. When the need for insurance increases due to higher risk aversion, employment requirements becomes less lenient, and oppositely when the environment becomes more risky.

Keywords: incentives, job-search, Reentitlement effects, unemployment insurance.

JEL Classification: E32, H3, J65

Suggested Citation

Andersen, Torben M. and Kristoffersen, Mark and Svarer, Michael, Benefit Reentitlement Conditions in Unemployment Insurance Schemes (March 2018). CEPR Discussion Paper No. DP12802, Available at SSRN: https://ssrn.com/abstract=3149471

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Mark Kristoffersen

National Bank of Denmark ( email )

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Michael Svarer

Aarhus University - Department of Economics and Business Economics ( email )

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Institute for the Study of Labor (IZA)

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