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.
Keywords JEL
Keywords
- Labor market policy
- Incomplete markets
- Unemployment
- Uncertainty
- New keynesian
Internal reference
- PSE Working Papers n°2021-36
URL of the HAL notice
Version
- 1