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Unemployment insurance and market structure

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  • Marceau, Nicolas

Abstract

This paper examines the impact of unemployment insurance (UI) on employment and unemployment in an industry in which the prices can vary due to some market power or general equilibrium (GE) effects. Some non-conventional results are obtained. First, it is shown that in an industry in which firms have some market power [Cournot competition], average industrial employment may be a decreasing function of the experience-rating because the number of firms in the industry is itself a decreasing function of the experience-rating. This contradicts the conventional view according to which employment should be an increasing function of the experience-rating. Second, the case of an industry characterized by perfect competition and general equilibrium effects on prices is examined. It is shown that the GE effects mitigate the conventional results as well as the one obtained by Burdett and Wright (1989b) [which contradict the conventional view] because those results were obtained in a partial equilibrium framework [fixed prices]. The general conclusion is that for industries with different degrees of market power, the same UI scheme has different impacts on employment and unemployment
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Suggested Citation

  • Marceau, Nicolas, 1993. "Unemployment insurance and market structure," Journal of Public Economics, Elsevier, vol. 52(2), pages 237-249, September.
    • Handle: RePEc:eee:pubeco:v:52:y:1993:i:2:p:237-249
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    Cited by:

    1. Cahuc, Pierre & Malherbet, Franck, 2004. "Unemployment compensation finance and labor market rigidity," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 481-501, March.
    2. Stéphane Auray & David L. Fuller, 2020. "Eligibility, experience rating, and unemployment insurance take‐up," Quantitative Economics, Econometric Society, vol. 11(3), pages 1059-1107, July.
    3. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
    4. Sahin Avcioglu & Bilgehan Karabay, 2020. "Labor market regulation under self‐enforcing contracts," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1965-2018, December.
    5. Julia Fath & Clemens Fuest, 2005. "Experience Rating versus Employment Protection Laws in a Model where Firms Monitor Workers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 299-314, June.
    6. Richard Martin & Steeve Mongrain & Sean Parkinson, 2004. "Severance Payments and Unemployment Insurance: A Commitment Issue," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(4), pages 593-606, October.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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