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Endogenous benefit rate

Many contributions concerned with self-financing UI assume that the UI tax rate adjusts to equilibrate the budget. Examples are Pissarides (1998) and Albrecht and Vroman (1999). Likewise, many authors assume, that the benefits, or the replacement ratio is used to maximise welfare or the utility of the median voter under the constraint that an equilibrated budget is maintained (see e.g. Persson and Tabellini (1996), Gruber (1997)). Studies, which consider both possibilities an UI has to balance the budget, are rarely found. Exceptions are Vijlbrief and van de Wijngaert (1995) and Rocheteau (1999). The former authors assign the different regimes to periods of the dutch UI policy. In contrast, we imagine of endogenous contributions as related to the short term, while endogenous benefits are related to the long term. An argument for this interpretation is that benefits are in most countries legal entitlements, while contributions can be adjusted more easily by UI authorities.



Subsections

Helge Sanner: Regional Unemployment Insurance, Potsdam 2001