Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works...

We study the general equilibrium effects of in-work beneifts in a search framework. Introducing in-work benefits reduces equilibrium unemployment, moderate wages, and boost participation and search. Total employment increases as a result. Considering in-work benefits in a general equilibrium...