This paper describes an equilibrium labour market in which an unemployment benefit system cannot raise the average value of being unemployed in the long run. It proposes an alternative benefit system which pays generous benefit rates when unemployment is high, but pays much lower rates in booms....

This paper analyses theoretically and empirically how employment subsidies should be targeted. We contrast measures involving targeting workers with low incomes/abilities and targeting the unemployed under the criteria of "approximate welfare efficiency" (AWE). Thereby we can identify policies...

The paper presents a stochastic insider-outsider model that accounts for the following stylized facts: (1) unemployment rates display a high degree of serial correlation, or `persistence'; (2) the average rate of unemployment has been higher in the United States than in Europe over the 1950s and...

This paper views movements in unemployment as the result of the interaction between: (a) lags in labour market decisions; and (b) labour market shocks with temporary and permanent components. Two features of unemployment dynamics are examined: (i) `unemployment persistence', arising when...

This paper provides a comprehensive evaluation of benefit sanctions, i.e. temporary reductions in unemployment benefits as punishment for noncompliance with eligibility requirements. In addition to the effects on unemployment durations, we evaluate the effects on post-unemployment employment...

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment; and the political difficulties in implementing more extensive reform programmes. We argue that the heart of...

This Paper analyses the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is...

This paper evaluates two theories of unemployment: the natural rate theory (whereby unemployment is depicted as fluctuating around a reasonably stable natural rate) and the chain reaction theory (which views movements in unemployment as the outcome of the interplay between labour market shocks...

This Paper investigates the effectiveness of benefit sanctions in reducing unemployment duration. Data from the Swiss labour market allow making a distinction between the effect of a warning that a person is not complying with eligibility requirements and the effect of the actual enforcement of...