Do Eligibility Criteria Influence Unemployment?

Economic research suggests that the amount and duration of unemployment benefits can increase equilibrium rate of unemployment, but the literature has overlooked the effects of other restrictions on benefits, namely the length of the qualifying period and the base period. We develop a Mortensen-Pissarides type matching model in which we integrate the following policy parameters: the base period, the qualifying period, unemployment benefits and a finite benefit duration. A worker is only entitled to unemployment benefits if he has completed the statutory qualifying period within the base period. We show that there is a trade-off between the eligibility parameters and the benefit parameters. A country that combines a high level of unemployment benefits with a long benefit duration can neutralize the effect on the unemployment rate with a long qualifying period and/or a short base period.