UNEMPLOYED BUT OPTIMISTIC: OPTIMAL INSURANCE DESIGN WITH BIASED BELIEFS

This paper analyzes how biased beliefs about employment prospects affect the optimal design of unemployment insurance. Empirically, I find that the unemployed greatly overestimate how quickly they will find work. As a consequence, they would search too little for work, save too little for unemployment and deplete their savings too rapidly when unemployed. I analyze the use of the “sufficient‐statistics” formula to characterize the optimal unemployment policy when beliefs are biased and revisit the desirability of providing liquidity to the unemployed. I also find that the optimal unemployment policy may involve increasing benefits during the unemployment spell.     

Labour Policy in the Federal Republic of Germany: Challenges and Concepts

ABSTRACT: This paper describes how German labour policy, both employment policy and active labour market policies, has developed between 1974 and 1987. Government intervention for full employment in a welfare state, a cooperative system of industrial relations, an active labour market policy, and a comparatively efficient system of vocational and adult education did not prevent the loss of full employment in 1974. But persistent labour market slack until today has not fundamentally changed the climate of relative political and social calm. The basic concepts, programmes and specific measures of labour policies pursued in the FRG are surveyed with special reference to their costs and effects on employment and the structure of unemployment. The challenges to labour policy stem from three complete business cycles around a slightly falling trend in employment and the bad prospectives of the German labour market until the year 2000. Four major measures of labour market policy now reduce registered unemployment by about 400,000 in the mid 1980s. Total costs of unemployment amounting to 57 billion DM per year offer financial alternatives to create jobs and to reduce working hours. Finally, actual proposals under discussion in Germany are examined in order to combat unemployment in a determined commitment to full employment immediately.     

Evaluating the Dynamic Effects of Active Labour Policies in Italy

Abstract. This paper analyses whether active labour market policies (ALMPs) have differing effects on unemployment and employment dynamics according to the particular region in which they are implemented. To this end, it analyses alternative theoretical and econometric models thought to capture the possible effects of active labour market policies on labour force dynamics. The econometric methodologies implemented are the generalized method of moment (GMM) and the panel vector autoregression (P‐VAR). The evidence yielded by the GMM models suggests that the effects of different ALMPs on unemployment are dissimilar across the Italian regions. It follows that some active programmes are likely to have a greater effect in the South than in the North. The results of the P‐VAR models estimated are synthesized by impulse response analysis and forecast error variance decomposition. The impulse response analysis suggests that an increase in total ALMP gives rise to: (i) a decrease in the unemployment rate; and (ii) a significant increase in labour force participation. More interestingly, the results obtained from the error variance decomposition analysis show that unemployment movements are not driven by shocks in the ALMPs and that, especially in the northern regions, atypical contracts shocks account for a substantial portion of unemployment dynamics.     

Mixed Unemployment and Differentiated Policies

ABSTRACT: The works related to the disequilibrium theory often show that situations of classical unemployment and of Keynesian unemployment coexist on a long-term basis. The following study deals with a theoretical model of mixed unemployment reflecting this coexistence. In this model, prices are assumed to be flexible upward, but not downward. Hence, classical unemployment leads to inflation, without quantitative rationing on demand, which is closer to reality. The study analyses the asymmetric relations between the classical and the Keynesian sectors as well as the resulting implications for economic policy. What comes out is that differentiated policies always have a stronger impact than aggregate policies. The highest level of efficiency is obtained by stimulating the supply of firms set in the classical situation, provided that one acts on the non-wage determinants of supply in order not to further depress the outlets for firms set in the Keynesian situation.     

中国失业问题与财政政策研究

失业是市场经济运行中各国以及我国社会经济发展面临的一大难题。促进就业、控制失业率是各国政府的宏观调控目标之一和不可推卸的责任。本报告从理论与实践的结合上,深入研究失业与宏观调控及财政政策的关系,揭示当前我国政府及财政促进就业政策的成效和问题,并在借鉴国际经验的基础上,进一步提出了近期我国缓解失业压力、建立促进就业长效机制的宏观对策思路和财政政策取向。     

A POLITICAL ECONOMY THEORY OF FISCAL POLICY AND UNEMPLOYMENT

This paper presents a political economy theory of fiscal policy and unemployment. The underlying economy is one in which unemployment can arise but can be mitigated by tax cuts and increases in public production. Such policies are fiscally costly, but can be financed by issuing government debt. Policy decisions are made by a legislature consisting of representatives from different political districts. With the available policies, it is possible for the government to completely eliminate unemployment in the long run. However, with political decision making, the economy always has unemployment. Unemployment is higher when the private sector experiences negative shocks. When these shocks occur, the government employs debt‐financed fiscal stimulus plans which involve both tax cuts and public production increases. When the private sector is healthy, the government contracts debt until it reaches a floor level. Unemployment levels are weakly increasing in the economy's debt level, strictly so when the private sector experiences negative shocks. Conditional on the level of workers employed, the mix of public and private output is distorted.     

Efficiency‐wage Unemployment and Economic Welfare in a Model of Endogenous Growth

This paper examines positive and normative implications of efficiency‐wage‐induced unemployment within a model of endogenous growth. Sector‐specific impacts of the wage rate on labour efficiency establish a correlation between the growth rate and the rate of unemployment. The sign of this correlation is determined by the intersectoral wage differential. Despite the existence of unemployment, decisive positive properties of the full‐employment model are preserved. However, welfare implications of the full‐employment model may be reversed. The optimal policy can be to reduce growth, while at the same time raising unemployment.     

On Labor Policies Affecting Investment in General Human Capital

Abstract. This paper develops a search model including workers’ investments in general human capital and investigates the effects of labor policies such as subsidies to human capital investment and unemployment benefits on the accumulation of human capital. It is shown that the equilibrium is not optimal because workers underinvest in human capital or firms open too many vacancies in comparison with the number of unemployed workers. Comparative statics show that an increase in subsidies to human capital investment adds to the number of vacancies per unemployed worker and to workers’ investments in human capital and that an increase in unemployment benefits decreases them. Finally, labor policies that remove the distortion are explored.     

Replenishment Policies for Multi‐Product Stochastic Inventory Systems with Correlated Demand and Joint‐Replenishment Costs

This study analyzes optimal replenishment policies that minimize expected discounted cost of multi‐product stochastic inventory systems. The distinguishing feature of the multi‐product inventory system that we analyze is the existence of correlated demand and joint‐replenishment costs across multiple products. Our objective is to understand the structure of the optimal policy and use this structure to construct a heuristic method that can solve problems set in real‐world sizes/dimensions. Using an MDP formulation we first compute the optimal policy. The optimal policy can only be computed for problems with a small number of product types due to the curse of dimensionality. Hence, using the insight gained from the optimal policy, we propose a class of policies that captures the impact of demand correlation on the structure of the optimal policy. We call this class (s, c, d, S)‐policies, and also develop an algorithm to compute good policies in this class, for large multi‐product problems. Finally using an exhaustive set of computational examples we show that policies in this class very closely approximate the optimal policy and can outperform policies analyzed in prior literature which assume independent demand. We have also included examples that illustrate performance under the average cost objective.     

On the Time Sequence of Unemployment Benefits When Search is Costly

Should we cut the level of unemployment benefits, or reduce their potential duration? The answer depends on the way the unemployed search behaviour and unemployment insurance schemes interact. In this paper, we consider that unemployment insurance funds can be used to improve search. Resulting hazards are increasing over the unemployment spell prior to the exhaustion of benefits, and plummet immediately after it. Turning to policy implications, we assume the public decision–maker aims to minimize the average duration of unemployment under a resource constraint. First, we show the stationary relationship between average unemployment duration and unemployment benefit is hump–shaped. Second, raising benefits over a short duration can reduce average duration. Finally, we demonstrate that most of the time, a declining (yet always positive) benefit scheme is optimal.     

Uncertainty,Flexibility Gap and Labour Demand in the Italian Economy

In this paper we analyse the effects of changes in the degree of uncertainty of the economic system and in the “flexibility gap”, deriving from the combined evolution of the degrees of uncertainty and flexibility of the economic system (in particular, labour market flexibility), on regular and irregular labour demand. On the basis of a simple qualitative model, we give a partial interpretation of some stylized facts of the Italian economy during the last decades. We argue that the low uncertainty and flexibility gap in the 1950s and 1960s, their remarkable increases in the 1970s, their inadequate reduction in the 1980s and the new increase of uncertainty and flexibility gap in the first half of the 1990s, have had a considerable influence on the quantity and quality of the “investment in employment” of Italian economy. The higher degree of uncertainty and the inadequate degree of flexibility of the Italian economic system are likely to have contributed towards the lower regular employment rate, compared to the main industrialized countries, and to high irregular employment. An adequate economic policy for reducing the uncertainty of the economic system together with a structural economic policy for increasing the flexibility of the economic system (in particular, an active labour policy for increasing the flexibility of the labour market), would be likely to produce positive effects on the quantity and quality of labour demand, contributing towards reducing unemployment.     

What is to be done about unemployment?

The rate of unemployment in Britain has been rising, and will doubtless continue to rise for the foreseeable future. On present trends any significant fall in the rate of unemployment appears improbable. We face the prospect of unemployment in the 1980s as severe as that experienced in the 1930s when only at its worst did the rate rise to the equivalent of nearly four million in today's terms. Against this background it is natural to despair of solutions. Certainly we cannot provide a policy which will produce an immediate return to ‘full employment’. but there are opportunities available for appreciably improving employment prospects. Particular policies are discussed and recommended in this paper, and the initiative has to be taken now.     

Immigration Policy,Equilibrium Unemployment,and Underinvestment in Human Capital

We analyse the impact of different immigration policies on human capital investment in a search‐theoretic model. This class of models features unemployment and underinvestment in human capital. The underinvestment in human capital can be solved by combining immigration policy with appropriate education subsidies. Extending the model with respect to different skill groups allows to analyse the observed bimodal skilled immigration of the USA.     

How Do Policies Affect the Exit Rate out of Unemployment? Disentangling Job Creation from Labour Market Frictions

This paper assesses the effects of labour market policies on the unemployment outflow rate while disentangling two channels, namely labour market tightness and employer–employee matching efficiency. Using a sample of 11 OECD countries over the period 1985–2007, we treat the endogeneity of market tightness with business cycle shocks and the tax wedge as instruments. We find that the replacement rate of unemployment benefits, Active Labour Market Policies as well as the tax wedge in countries with poorly representative unions, have a significant, robust, and large impact on market tightness. Employment protection has a negative but small impact on matching efficiency. Overall, policy effects appear to be mostly channeled through market tightness and job creation.     

Unemployment Insurance Policy and Union Wage Formation

Abstract. The paper considers the wage and employment effects of alternative social security policies. Such a policy can take the form of a fixed benefit level or linking the level of unemployment benefits to private sector wages. The latter is an important social security policy instrument to guarantee an equitable distribution of income. A fixed benefit level policy yields lower wages and larger employment than an automatic link between the level of benefits and the wage rate. Further, if the government decides to make the link conditional on the stabilization of the tax rate, wages are lower and employment is higher than in both former alternatives. By endogenizing its social security policy, the government is able to reduce the loss in employment that the link policy brings about.     

External Constraint and the Labour Oriented Supply-side Policies in Italy

ABSTRACT: This paper attempts to estimate the relative importance of various factors that, under an increasing external constraint, have contributed to the competitiveness and output growth in the Italian industry during the last eighteen years. In particular, it tries to evaluate the effectiveness of the few relevant supply-side policies adopted in Italy, which were based essentially on labour oriented policy instruments. It is found that technological change was far more important than policy factors for restructuring and reconverting industrial activities and increasing the level of production.     

Kind of Black: The Musicians' Labour Market in Italy

It is estimated that only 5 per cent of musicians in Italy are regularly employed. In an attempt at understanding such a peculiar situation, we build a theoretical model of the musicians' labour market in which we embed the main institutional features of the Italian system. The presence of taxation encourages the formation of a black labour market for musicians and discourages talented agents from becoming full‐time musicians in all second‐best economies. In Italy both tendencies are particularly strong, and exacerbated by the peculiarities of the pension system for musicians. These inefficiencies might be corrected by a twofold policy: the reform of the pension system, highly desirable but unlikely to be politically feasible in the current Italian institutional setting, and the introduction of a sufficiently large unemployment benefit for musicians, step that has a general interest for any second‐best economy and not only for the case of the musicians' labour market, and that might instead be viable under certain circumstances.     

执行时间视角下的可再生能源发电项目激励政策优化研究

为实现可持续发展并降低温室气体排放,中国需大力发展可再生能源,而激励政策对可再生能源发展具有重要推动作用。鉴于此,本文采用实物期权方法评价了中国可再生能源发电项目激励政策的实施效果：首先分析了可再生能源项目的经济性,提出模型假设,接着构建并求解实物期权模型。为更直观地评价激励政策效果,本文利用最优执行条件求解项目预期执行时间和不同技术水平下的激励政策最优值。最后,以光伏发电项目为例进行实证分析。研究表明：①目前,中国光伏产业还难以独立发展,仍需国家政策的支持,但现行或曾实施的光伏激励政策存在超额激励现象。②随着技术水平的提高,为鼓励投资者及时投资,政府需提高激励力度。③从政府支出、政策效果和技术影响三个角度综合分析,单项激励政策中上网电价政策效果最佳,但政府支出较高;价格补贴政策效果偏弱,但政府支出较低;与其他两项政策相比,成本补偿政策效果较差。     

Dynamics of Female Employment and Youth Unemployment in Italy

ABSTRACT: The authors, in this article, consider the possibility of how the peak in the birth rate during the 60s could have affected the present unemployment situation. First of all the hypothesis put forward by various sources that the baby boom is the principle cause of unemployment is examined, together with how plausible this explanation is. Then some data relevant to birth rates and the subsequent employment levels in various countries is presented, and finally, a more detailed analysis of the Italian situation is given, both with regard to the baby boom and the most recent employment statistics for the different Italian areas. The authors also take a close look at the female labour market and its development over the past years, and how these figures would appear to confute the baby boom as being the sole cause responsible for present day unemployment levels.     

面向批量订货和多需求类的生产与库存配给

针对一个面向两个需求类的生产企业,根据客户每次订货是否可分批交货,提出了当客户订货可分割和不可分割时供应商的最优生产和库存配给策略.分析表明,供应商的最优生产控制策略可用一个取决于系统状态的基准库存水平表示,最优的库存配给策略则用一个多层的取决于状态的配给水平向量表示.随后,该结论被推广至包含任意多个需求类的生产系统.数值分析验证了文中最优策略的有效性.