Optimal unemployment insurance in a matching equilibrium

Melvyn Coles, Adrian Masters

Research output: Contribution to journalReview article

Abstract

This article considers optimal unemployment insurance (UI) in an equilibrium matching framework where wages are determined by strategic bargaining. It compares the outcome with the standard Nash bargaining approach, which can be interpreted as union wage bargaining with an insider/outsider distortion. It also shows that a coordinated policy approach, one that chooses job creation subsidies and UI optimally, generates a much greater welfare gain than a policy that simply varies UI payments by duration.

Original languageEnglish (US)
Pages (from-to)109-138
Number of pages30
JournalJournal of Labor Economics
Volume24
Issue number1
DOIs
StatePublished - Jan 2006

ASJC Scopus subject areas

  • Industrial relations
  • Economics and Econometrics

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