mandated unemployment insurance (UI) and employment protection (EP). To illuminate the forces in these models, we study how UI … higher layoff taxes suppress frictional unemployment in less turbulent times, prevails in the models with labour market … impossible to include generous government-supplied unemployment insurance in that model without getting the unrealistic result …

high unemployment benefits, an increase in turbulence increases the unemployment rate and the duration of unemployment … while leaving the inflow rate into unemployment roughly unchanged, mirroring features of European data in the 1980s and 1990 …