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Nordic Economic Policy Review

Labour Market Consequences of the Economic Crisis

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The Nordic Economic Policy Review is published by the Nordic Council of Ministers and addresses policy issues in a way that is useful for informed non-specialists as well as for professional economists. All articles are commissioned from leading professional economists and are subject to peer review prior to publication. The Nordic Economic Policy Review is published twice a year. The journal is distributed free of charge to members of the Nordic economic associations. The easiest way of subscribing to the NEPR is therefore to become a member of one of these associations, i.e., Denmark: Nationaløkonomisk Forening Finland: Taloustieteellinen Yhdistys Norway: Samfunnsøkonomene Sweden: Nationalekonomiska Föreningen For institutional subscriptions, please contact [email protected] Content: Introduction - Lars Calmfors and Bertil Holmlund Youth unemployment in Europe and the United States: David N.F. Bell and David G. Blanchflower Comment by Oskar Nordström Skans Employment consequences of employment protection legislation - Per Skedinger Comment by Assar Lindbeck Business cycle contingent unemployment insurance - Torben M. Andersen and Michael Svarer Comment by Erik Höglin Is short-time work a good method to keep unemployment down? - Pierre Cahuc and Stéphane Carcillo Comment by Ann-Sofie Kolm What active labor market policy works in a recession? - Anders Forslund, Peter Fredriksson and Johan Vikström Comment by Clas Olsson Regular education as a tool of counter-cyclical employment policy - Christopher Pissarides Comment by Björn Öckert

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Business cycle contingent unemployment insurance

The financial crisis has raised the question whether unemployment insurance schemes are sufficiently flexible. In a severe recession, there seems to be a strong argument for making the scheme more generous (higher benefit levels, longer duration), and vice versa in a boom. Building such business cycle contingencies into the unemployment benefit scheme may yield more insurance, but does this come at the cost of increased structural problems? These issues are considered in a search-matching framework capturing both the incentive and insurance aspects of unemployment benefits. It is shown that insurance and incentive effects may actually both call for counter-cyclical elements in the benefit scheme. Issues related to the implementation of such business cycle contingencies are discussed.

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