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A Normative Analysis of Wage Subsidies and Unemployment Benefits Under Fixed Number of Working Hours

Author

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  • Salvador LÓPEZ

    (Universidad Autónoma de Barcelona)

Abstract

In recent years Western governments have introduced a number of emergency measures in their fight against short run unemployment. In this paper a normative analysis concerning the joint implementation of two such measures is offered, viewing unemployment as involuntary, and taking account of the dissatisfaction cost (lack of the social status that having a job provides) borne by unemployed workers. Attention is paid to the existing trade-off between a policy of wage subsidies to the private sector aimed at stimulating employment and a policy of transfer payments to the unemployed intended to increase their purchasing power. In a simple general equilibrium model with wage rigidity, wage subsidy formulas are derived for two settings of incomes control.

Suggested Citation

  • Salvador LÓPEZ, 1994. "A Normative Analysis of Wage Subsidies and Unemployment Benefits Under Fixed Number of Working Hours," Discussion Papers (REL - Recherches Economiques de Louvain) 1994045, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvre:1994045
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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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