Four general equilibrium search models are compared quantitatively. The
baseline framework is a calibrated macroeconomic model of the US economy
designed for a welfare analysis of unemployment insurance policy. The
other models make three simple and natural specification changes,
regarding tax incidence, monopsony power in wage determination, and the
relevant threat point. These specification changes have a major impact
on the equilibrium and on the welfare implications of unemployment
insurance, ...
Four general equilibrium search models are compared quantitatively. The
baseline framework is a calibrated macroeconomic model of the US economy
designed for a welfare analysis of unemployment insurance policy. The
other models make three simple and natural specification changes,
regarding tax incidence, monopsony power in wage determination, and the
relevant threat point. These specification changes have a major impact
on the equilibrium and on the welfare implications of unemployment
insurance, partly because search externalities magnify the effects of
wage changes. The optimal level of unemployment insurance depends
strongly on whether raising benefits has a larger impact on search
effort or on hiring expenditure.
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