Working Paper Series, Uppsala Center for Labor Studies, Department of Economics, Uppsala University
Part-Time Unemployment and Optimal Unemployment Insurance
() and Bertil Holmlund
Abstract: A significant fraction of the labor force consists of
employed workers who are part-time unemployed (underemployed) in the sense
that they are unable to work as much as they prefer. This paper develops a
search and matching model to study the design of optimal unemployment
insurance in an economy with unemployment as well as part-time
unemployment. Part-time unemployment provides income insurance and serves
as a stepping stone to full-time jobs. Unemployment benefits for
part-timers increase the outflow from unemployment to part-time work but
reduce the outflow from part-time work to fulltime employment. We examine
the optimal structure of benefits for unemployed and underemployed workers.
The results indicate nonnegligible welfare gains associated with time
limits for unemployment benefits as well as for part-time benefits. The
welfare gains from optimal UI are larger when wages are fixed than when
they are flexible.
Keywords: Job search; part-time unemployment; unemployment insurance; (follow links to similar papers)
JEL-Codes: J64; J65; (follow links to similar papers)
36 pages, February 28, 2011
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