Working Paper: CEPR ID: DP2541
Authors: Aico van Vuuren; Gerard J. van den Berg; Geert Ridder
Abstract: We analyse the impact of unemployment benefits and minimum wages using an equilibrium search model, which allows for dispersion of benefits and productivity levels, job-to-job transitions, and structural and frictional unemployment. The estimation method uses readily available aggregate data on marginal distributions of unemployment durations as well as wages and benefit levels. Different causes of structural and frictional unemployment are investigated. We investigate the efficiency of the imposition of a single benefit level for all household types and the introduction of an Earned Income Tax Credit.
Keywords: benefit levels; equilibrium; search; minimum wages; wages; welfare
JEL Codes: C41; E24; J31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unemployment benefits (J65) | social welfare (I38) |
| mandatory minimum wages (J38) | social welfare (I38) |
| mandatory minimum wages (J38) | structural unemployment among parents (J64) |
| unemployment benefits (J65) | unemployment rates (J64) |
| changes in unemployment benefits (J65) | reservation wage of households without children (R20) |
| family credit system (D14) | social welfare (I38) |
| selective minimum wage for households with children (J38) | social welfare (I38) |
| search frictions (F12) | total unemployment (J64) |
| mandatory minimum wages and unemployment benefits (J38) | total unemployment (J64) |