The Simple Economics of Benefit Transfers

42 Pages Posted: 15 Feb 2006

See all articles by Dennis J. Snower

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 1995

Abstract

The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits into employment subsidies--"benefit transfers" for short--would help replace the unemployment trap by an incentive to work. The vouchers rise with people`s unemployment durations and with the amount of training provided. The policy would be costless to the government since the cost of the employment vouchers is set equal to the amount saved on unemployment benefits. It would not be inflationary since the long-term unemployed, on whom the vouchers are targeted, have little influence on wage setting.

JEL Classification: J23, J24, J31, J32, J64

Suggested Citation

Snower, Dennis J., The Simple Economics of Benefit Transfers (January 1995). IMF Working Paper No. 95/5, Available at SSRN: https://ssrn.com/abstract=883155

Dennis J. Snower (Contact Author)

University of Kiel - Institute for World Economics (IfW) ( email )

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Institute for the Study of Labor (IZA)

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