Scandinavian Working Papers in Economics

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

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

Susanne Ek () and Bertil Holmlund ()
Additional contact information
Susanne Ek: Uppsala Center for Labor Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Bertil Holmlund: Uppsala Center for Labor Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

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

JEL-codes: J31; J64; J65

36 pages, April 8, 2010

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