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Part-Time Unemployment and Optimal Unemployment Insurance

Author

Listed:
  • Susanne Ek
  • Bertil Holmlund
Abstract
A significant fraction of the labor force consists of employed workers who are part-time unemployed (underemployed) in the sense that they are unable to work as much as they prefer. This paper develops a search and matching model to study the design of optimal unemployment insurance in an economy with unemployment as well as part-time unemployment. Part-time unemployment provides income insurance and serves as a stepping stone to full-time jobs. Unemployment benefits for part-timers increase the outflow from unemployment to part-time work but reduce the outflow from part-time work to fulltime employment. We examine the optimal structure of benefits for unemployed and underemployed workers. The results indicate non-negligible welfare gains associated with time limits for unemployment benefits as well as for part-time benefits. The welfare gains from optimal UI are larger when wages are fixed than when they are flexible.

Suggested Citation

  • Susanne Ek & Bertil Holmlund, 2011. "Part-Time Unemployment and Optimal Unemployment Insurance," CESifo Working Paper Series 3370, CESifo.
    • Handle: RePEc:ces:ceswps:_3370
    as

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    References listed on IDEAS

    as
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    Cited by:

    1. Kyyrä, Tomi & Parrotta, Pierpaolo & Rosholm, Michael, 2013. "The effect of receiving supplementary UI benefits on unemployment duration," Labour Economics, Elsevier, vol. 21(C), pages 122-133.
    2. Tito Boeri & Pierre Cahuc, 2022. "Labor Market Insurance Policies in the XXI Century," SciencePo Working papers Main hal-03878719, HAL.
    3. Anna Godøy & Knut Røed, 2016. "Unemployment Insurance and Underemployment," LABOUR, CEIS, vol. 30(2), pages 158-179, June.
    4. Susanne Ek Spector, 2022. "Should unemployment insurance cover partial unemployment?," IZA World of Labor, Institute of Labor Economics (IZA), pages 199-199, June.
    5. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2016. "Earnings exemptions for unemployed workers: The relationship between marginal employment, unemployment duration and job quality," Labour Economics, Elsevier, vol. 42(C), pages 177-193.
    6. Kyyrä, Tomi & Pesola, Hanna & Rissanen, Aarne, 2017. "Unemployment Insurance in Finland: A Review of Recent Changes and Empirical Evidence on Behavioral Responses," Research Reports 184, VATT Institute for Economic Research.
    7. Auray, Stéphane & Lepage-Saucier, Nicolas, 2021. "Stepping-stone effect of atypical jobs: Could the least employable reap the most benefits?," Labour Economics, Elsevier, vol. 68(C).

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    More about this item

    Keywords

    job search; part-time unemployment; unemployment insurance;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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