The Right Stimulus Extended Unemployment Insurance Benefits or Tax Cuts?

Topics:
Insurance,
Payroll,
Taxes
Tags:
Finance,
Financial Planning,
Free Trade,
Insurance,
Taxes,
Unemployment Insurance,
University Of Pennsylvania
Source:
University of Pennsylvania

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Overview: Extending unemployment insurance coverage has become a crucial ingredient in the typical response of U.S. fiscal policy to adverse economic conditions. This paper constructs and quantifies a stochastic general equilibrium search model, with incomplete unemployment insurance, to examine the economic consequences of extending unemployment benefits during recessions. Moreover, it also compares these results with those of alternative proposals such as cuts in payroll taxes. Although extended benefits are poor tools of countercyclical policy they are more effective, in terms of welfare, than comparable tax cuts.

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Format: PDF | Size: 455KB | Date: Aug 2002 | Pages: 28

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