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Department of Economics, Uppsala University Working Paper Series, Uppsala Center for Labor Studies, Department of Economics, Uppsala University

No 2010:1:
Family Job Search, Wage Bargaining, and Optimal Unemployment Insurance

Susanne Ek () and Bertil Holmlund ()

Abstract: In this paper we develop an equilibrium search and matching model where two-person families as well as singles participate in the labor market. We show that equilibrium entails wage dispersion among equally productive risk-averse workers. Marital status as well as spousal labor market status matters for wage outcomes. In general, employed members of two-person families receive higher wages than employed singles. The model is applied to a welfare analysis of alternative unemployment insurance systems, while recognizing the role of spousal employment as a partial substitute for public insurance. The optimal system involves benefit differentiation based on marital status as well as spousal labor market status

Keywords: Job search; wage bargaining; wage differentials; unemployment; unemployment insurance; (follow links to similar papers)

JEL-Codes: J31; J64; J65; (follow links to similar papers)

36 pages, April 8, 2010

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