We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
UNEMPLOYMENT POLICIES IN AN ECONOMY WITH ADVERSE SELECTION.
- Authors
Kudoh, Noritaka
- Abstract
This paper studies the effects of unemployment policies in a simple static general equilibrium model with adverse selection in the labour market. Firms offer a contract that induces the self-selection of workers. In equilibrium, all unskilled workers are screened out and some skilled workers are rationed out. It is shown that the provision of unemployment insurance raises involuntary unemployment by encouraging adverse selection, while unemployment assistance – or subsidy to unemployment – reduces involuntary unemployment. A simple efficiency wage model is also presented to show that either of the two policies reduces employment by taxing effort and subsidizing shirking. The key is whether the social role of unemployment is a sorting device or a worker discipline device.
- Subjects
ADVERSE selection (Insurance); UNEMPLOYMENT insurance; EFFECT of unemployment insurance on unemployment; ECONOMIC research; LABOR market; ECONOMIC models
- Publication
Bulletin of Economic Research, 2007, Vol 59, Issue 2, p179
- ISSN
0307-3378
- Publication type
Article
- DOI
10.1111/j.0307-3378.2007.00253.x