Can welfare abuse be welfare improving?
Title: Can welfare abuse be welfare improving?
Author: MAZUR, Karol
Citation: Journal of public economics, 2016, Vol. 141, pp. 11–28
I analyze quantitatively a model of labor search with unemployment insurance (UI), savings, voluntary quits and various labor attachment requirements. In particular, I study welfare consequences of a powerful reform giving UI entitlement to workers quitting their jobs voluntarily in order to search for another one. Results of the model calibrated to the US labor market show that there may be significant welfare gains associated with pursuing a generous entitlement policy for quitters as compared to the US status-quo. Moreover, I employ the assumption of monetary search costs and show that it can explain the empirically documented unemployed worker search behavior. Finally, by inducing different unemployment benefit eligibility requirements, the model identifies a concrete policy that could help us understand differences in the unemployment rate, match quality and income inequality between the US and Europe.
Received 7 January 2015, Revised 29 June 2016, Accepted 1 July 2016, Available online 9 July 2016
Type of Access: embargoedAccess
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