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How to Finance Unemployment Benefits in an Economy with Search Generated Equilibrium Unemployment

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  • Pia Weiss

    (Institute for Economic Policy)

Abstract

In this paper, the effects of alternatives to finance unemployment benefits on employment and wages are examined in a model with search generated equilibrium unemployment. It is demonstrated that employment improves if a value--added tax is levied, as opposed to a social system contribution, where employees bear part of the contribution. In addition, it is shown that shifting the burden of the contribution to the Social Security system from employers to employees may have negative employment effects if the benefits are not taxed. This effect vanishes if the benefits are taxed.

Suggested Citation

  • Pia Weiss, 2001. "How to Finance Unemployment Benefits in an Economy with Search Generated Equilibrium Unemployment," Public Economics 0103001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwppe:0103001
    Note: Type of Document - Adobe PDF; prepared on IBM PC - LaTeX; to print on HP; pages: 21 ; figures: included
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    References listed on IDEAS

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    More about this item

    Keywords

    job search; unemployment; taxes;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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