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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2006:12:
In-Work Benefits in Search Equilibrium

Ann-Sofie Kolm () and Mirco Tonin ()

Abstract: We study the general equilibrium effects of in-work beneifts in a search framework. Introducing in-work benefits reduces equilibrium unemployment, moderate wages, and boost participation and search. Total employment increases as a result. Considering in-work benefits in a general equilibrium setting reveals that employment increases mainly though the impact on job creation. This is in contrast to what is usually stressed, namely that employment increases because individuals are provided with incentives to take a job.

Keywords: In-work benefits; unemployment; participation; (follow links to similar papers)

JEL-Codes: J21; J38; (follow links to similar papers)

40 pages, December 21, 2006

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