This site is for archive purposes. Please visit www.eliamep.gr for latest updates
Go to Top

Unemployment insurance and reservation wages

Le Barbanchon, Thomas, Rathelot, Roland, Roulet, Alexandra, (2017), “Unemployment insurance and reservation wages”, Vox Eu, 27 June

Pinpointing the right level of generosity of an unemployment insurance system is a delicate exercise. The main objective of the unemployment system is to provide insurance for workers who lose their jobs. The system should be generous enough to smooth income shocks and allow workers to look for a job when economic conditions are good. However, high replacement rates and long benefit durations may have two kinds of effects. First, they may discourage workers from trying to search for a job. And second, they may increase workers’ reservation wages, or the lowest wage employees are ready to accept.

Relevant Posts