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In the case of a central UI, the conditions for a migration equilibrium and for a balance budget remain, compared to model TC, formally unchanged. The only difference is, that
is endogenous, while
is given. The conditions read
and
![\begin{displaymath}
F^{UI}= n^1 K \tau w^1 + n^2 K \tau w^2- (s M-n^1 K) \beta w^1- [(1-s) M - n^2 K] \beta w^2 =0.
\end{displaymath}](img75.png) |
(14) |
Partially differentiating equations (13) and (14) gives
and
In contrast to the derivatives of
in model TC, the derivatives of
have the inverse sign because the impact of an increase of the benefit rate on the balance of the UI has the same direction as the impact of a decrease of the tax rate. This means, that the signs of the derivatives with respect to wages require that the rate of employment in region 1 is higher than in region 2 (condition a, see the appendix).
has the indicated sign if condition b is met. UI benefits have an ambiguous effect on migration in general. It is negative, if the following inequality holds (condition d):
Model BC consists of equations (1) and (6) respectively for both regions, equations (13) and (14). Figure 3 illustrates the interplay of the endogenous variables. Again, the ambiguous effects are labeled with the letter of the condition that must be fulfilled.
Figure 3:
Partial effects in model BC
 |
Next: Regional UI, endogenous benefit
Up: Endogenous benefit rate
Previous: Endogenous benefit rate
Helge Sanner: Regional Unemployment Insurance, Potsdam 2001