On the design of labor market programs as stabilization policies

Pre-print, Working paper: This paper analyzes the optimal cyclical behavior of labor market policies in an economy with asset and labor market frictions. The policies of interest include unemployment insurance (UI) and employment protection (EP). In addition to their supply-side effects, labor market policies affect the aggregate demand via earning risk and redistribution channels. Under bilateral wage bargaining, I find that procyclical UI and countercyclical EP deliver superior welfare outcomes through stabilization via both supply and demand channels.

Author(s)

Euiyoung Jung

Date of publication
  • 2021
Keywords JEL
E12 E21 E24 E29 E32 E61 E69 J65 J68
Keywords
  • Labor market policy
  • Incomplete markets
  • Unemployment
  • Uncertainty
  • New keynesian
Internal reference
  • PSE Working Papers n°2021-36
Version
  • 1