Welfare Benefit Reforms and Employment

Arbeitspapier

We consider an economy characterised by involuntary unemployment among low skilled workers, and investigate the implications for employment and income of welfare schemes often advocated as less distortionary. We show that reducing unemployment benefits in favour of income subsidies (social benefits) reduces employment in general equilibrium and also the income of low skilled workers, for not too high distortions in the labour market. Furthermore, it leads to a higher tax burden and a welfare deterioration. To support employment, we suggest that systems grounded in contribution-based unemployment insurance schemes are to be preferred and strengthened.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6403

Classification and Topics

• Classification: Wirtschaft ; Taxation, Subsidies, and Revenue: General ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: unemployment benefits ; social benefits ; taxes ; unions ; employment

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Aloi, Marta ; Lloyd-Braga, Teresa ; Leite-Monteiro, Manuel
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/161842
• Last update: 10.03.2025, 11:42 AM CET