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Journal Article

Bismarck versus Beveridge. Flat-Rate and Earnings-Related Unemployment Insurance in a General Efficiency Wage Framework

Laszlo Goerke
FinanzArchiv / Public Finance Analysis
Vol. 57, No. 3 (2000), pp. 243-260
Stable URL: http://www.jstor.org/stable/40912930
Page Count: 18
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Bismarck versus Beveridge. Flat-Rate and Earnings-Related Unemployment Insurance in a General Efficiency Wage Framework
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Abstract

A higher unemployment compensation reduces the incentives to provide effort in efficiency wage models. If there is a stronger dependence of unemployment benefits on current earnings, these incentives will be strengthened and efficiency wages can be lowered. An unemployment insurance with earnings-related benefits is thus characterised by higher employment than one with flat-rate benefits. The paper investigates under which conditions this advantage persists in the longer term when financial constraints such as an ex-post constant level of benefits and a balanced budget rule apply, or when firms are constrained to a constant level of profits.

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