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A Normative Analysis of Wage Subsidies and Unemployment Benefits under Fixed Number of Working Hours

Published online by Cambridge University Press:  17 August 2016

Salvador López
Salvador López*
Affiliation:
Universidad Autónoma de Barcelona
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Summary

In recent years Western governments have introduced a number of emergency measures in their fight against short run unemployment. In this paper a normative analysis concerning the joint implementation of two such measures is offered, viewing unemployment as involuntary, and taking account of the dissatisfaction cost (lack of the social status that having a job provides) borne by unemployed workers. Attention is paid to the existing trade-off between a policy of wage subsidies to the private sector aimed at stimulating employment and a policy of transfer payments to the unemployed intended to increase their purchasing power. In a simple general equilibrium model with wage rigidity, wage subsidy formulas are derived for two settings of incomes control.

Résumé

Résumé

Depuis quelques années les pays occidentaux ont introduit certaines mesures dans leur lutte contre le chômage à court terme. Dans cet article nous présentons une analyse normative concernant la mise au point conjointe de deux de ces mesures. Cette analyse considère le chômage comme étant involontaire, et tient compte du côut d’insatisfaction que les chômeurs supportent (absence du statut social que fournit tout poste de travail). Nous étudions ici le conflit existant entre une politique de subside salarial aux entreprises privées afin de stimuler l’emploi et une politique d allocation de chômage dans le but d’augmenter le niveau de vie des chômeurs. A partir d’un modèle simple d’équilibre général incorporant un salaire rigide, nous dérivons des formules de subsides salariaux sous deux hypothèses de contrôle des revenus.

Keywords

H21J38J68H21J38J68
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 60 , Issue 4 , December 1994 , pp. 487 - 510
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1994 

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Footnotes

(*)

This paper is part of Chapter II of my Ph.D. dissertation “Wage Subsidies in Disequilibrium Economies” defendend at the Université Catholique de Louvain in 1990. I acknowledge helpful comments by J.H. Drèze, J.M. Esteban, P. Pestieau, H. Tulkens and particularly by my adviser, M. Marchand.

References

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