Arbeitspapier

Layoff taxes, unemployment insurance, and business cycle fluctuations

This paper studies the role of labor market institutions in business cycle fluctuations. We develop a DSGE model with search and matching frictions and incorporate a US unemployment insurance experience rating system. Layoff taxes based on experience rating finance the cost of unemployment benefits and create considerable employment adjustment costs. Our framework helps realign the search and matching model with the empirical properties of its most salient variables. The model reproduces the negative correlation between vacancies and unemployment, i.e., the Beveridge curve. Simulations show that the model generates more cyclical volatility in its key variable - the ratio of job vacancies to unemployment (labor market tightness). Moreover, layoff taxes reduce the excess sensitivity of job destruction found in Krause and Lubik (2007) and strengthen the negative correlation of job creation and job destruction. Thus, the model matches key labor market data while incorporating an important feature of the US labor market.

Sprache
Englisch

Erschienen in
Series: Kiel Working Paper ; No. 1988

Klassifikation
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Unemployment: Models, Duration, Incidence, and Job Search
Unemployment Insurance; Severance Pay; Plant Closings
Thema
search and matching
experience rating
unemployment insurance
Beveridge curve

Ereignis
Geistige Schöpfung
(wer)
Ahrens, Steffen
Nejati, Nooshin
Pfeiffer, Philipp L.
Ereignis
Veröffentlichung
(wer)
Kiel Institute for the World Economy (IfW)
(wo)
Kiel
(wann)
2015

Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Ahrens, Steffen
  • Nejati, Nooshin
  • Pfeiffer, Philipp L.
  • Kiel Institute for the World Economy (IfW)

Entstanden

  • 2015

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