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Welfare Differentials Across French and US Labour Markets

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  • Cohen, Daniel

Abstract

The paper computes lifetime welfare functions for French and American workers. For the vast majority of workers, we find that the lifetime discrepancy between the welfare of an employed and that of an unemplyed worker appear to quite similar in the two countries, corresponding to nine monthly wages in the US, and 13 monthly wages in France. From these and othervalues, we then calibrate standard parameters of equilibrium theories of unemployment such as hiring and firing costs and the quantitative incidence of unemployment benefit onto the equilibrium hiring rates. We find that the latter factor dominates the other. Because of the heterogeneity that we document on the labour market, we show, however, why reducing the level of French unemployment benefits to the level of American ones would dramatically reduce the welfare of the most vulnerable workers on the labour market.

Suggested Citation

  • Cohen, Daniel, 1999. "Welfare Differentials Across French and US Labour Markets," CEPR Discussion Papers 2114, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2114
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    References listed on IDEAS

    as
    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 417-434.
    3. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
    4. Cohen, Daniel & Lefranc, Arnaud & Saint-paul, 1997. "French unemployment : a transatlantique perspective," CEPREMAP Working Papers (Couverture Orange) 9705, CEPREMAP.
    5. Daniel Cohen & Arnaud Lefrance & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 12(25), pages 266-291.
    6. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Giles Saint-Paul, 2005. "Did European Labor Markets Become More Competitive in the 1990s? Evidence from Estimated Worker Rents," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.),Labor Markets and Institutions, edition 1, volume 8, chapter 8, pages 281-300, Central Bank of Chile.
    2. repec:adr:anecst:y:2008:i:90:p:07 is not listed on IDEAS
    3. Paul Frijters, 2000. "Persistencies in the Labor Market," Econometric Society World Congress 2000 Contributed Papers 1303, Econometric Society.

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    More about this item

    Keywords

    Labour Market Dynamics; Ranking; Unemployment Duration; wage earnings inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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