Redistribution and employment policies with endogenous unemployment

We study optimal redistribution policy in an economy with three types of unemployed persons: those unable to work, the voluntarily unemployed, and the involuntarily unemployed. Both voluntary and involuntary unemployment are endogenous. Voluntary unemployment arises because individuals have differen...

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Bibliographic Details
Published in:Journal of public economics 2003-10, Vol.87 (11), p.2407-2430
Main Authors: Boadway, Robin, Cuff, Katherine, Marceau, Nicolas
Format: Article
Language:English
Subjects:
Distribution
Economic efficiency
Economics
Employment policies
Employment policy
Labour policy
Public economics
Redistribution
Unemployment
Wages
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Summary:We study optimal redistribution policy in an economy with three types of unemployed persons: those unable to work, the voluntarily unemployed, and the involuntarily unemployed. Both voluntary and involuntary unemployment are endogenous. Voluntary unemployment arises because individuals have different preferences, while involuntary unemployment results from frictions in the labour market or from an efficiency wage. We consider the employment policies of a well-informed government when it can and cannot commit to its policies. The model is simple, yet rich enough to reflect real-world policies, including transfers to the disabled, welfare for non-working employables, unemployment insurance, employment subsidies, and taxes on workers and firms.
ISSN:0047-2727
1879-2316
DOI:10.1016/S0047-2727(01)00151-7