This Paper explains the divergent behaviour of European and US unemployment rates using a job market-matching model of the labour market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an increase in real interest rates, and an increase in tax...

We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity. Unemployment insurance has the standard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple model are consistent with the...

The paper analyses complementarities among a variety of labour market policies. It shows: (a) that a wide range of labour market institutions (e.g. unemployment benefits, job security legislation and payroll taxes) have complementary effects on unemployment; and thus (b) that policies aimed at...

This Paper presents the results of an experimental study on unemployment benefit sanctions. The experimental set-up allows us to distinguish between the effects of benefit sanctions once they are imposed (the ex post effect) and the effects that discourage the unemployed from risking benefit...

This paper discusses how employment vouchers should depend on age in a simple overlapping generations model in which workers are either young or old. We find that young workers should receive higher vouchers as displacement of the old rises and as the deadweight loss from providing vouchers to...

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...

Standard search theory and some empirical evidence suggest that an unemployed individual's probability of entering employment increases as they approach the time when unemployment benefits are due to expire. This pattern may not carry over to countries such as Sweden, where labour market...

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...

The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits, `benefit transfers', would help replace the...

This paper explores the optimal design of subsidies for hiring unemployed workers (‘employment vouchers’ for short) in the context of a simple macroeconomic model of the labour market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the...