TY - JOUR
T1 - Revisiting the macroeconomic impact of benefits generosity
AU - Raza, Hamid
AU - Byrialsen, Mikael Randrup
AU - Stamhus, Jørgen
PY - 2023
Y1 - 2023
N2 - This paper is an attempt to empirically investigate the macroeconomic effects of public policy on unemployment benefits. We address this issue by asking a simple question: How does public policy relating to unemployment benefits affect economic growth, productivity, and unemployment rate? We employ a dynamic panel VAR and perform a number of estimations, using data for several OECD countries. Overall, our results suggest that increases in unemployment benefits have both positive and adverse effects. In particular, we find that benefits generosity can increase output and productivity, but can also weakly raise unemployment rates in some cases. Our analysis in this paper calls into question the mainstream policy view of using reduction in unemployment benefits as a tool to improve macroeconomic outcomes.
AB - This paper is an attempt to empirically investigate the macroeconomic effects of public policy on unemployment benefits. We address this issue by asking a simple question: How does public policy relating to unemployment benefits affect economic growth, productivity, and unemployment rate? We employ a dynamic panel VAR and perform a number of estimations, using data for several OECD countries. Overall, our results suggest that increases in unemployment benefits have both positive and adverse effects. In particular, we find that benefits generosity can increase output and productivity, but can also weakly raise unemployment rates in some cases. Our analysis in this paper calls into question the mainstream policy view of using reduction in unemployment benefits as a tool to improve macroeconomic outcomes.
KW - GMM
KW - Panel VAR
KW - income
KW - labour market
KW - mainstream theory
KW - post-Keynesian theory
KW - unemployment benefits
U2 - 10.1080/09538259.2021.1995147
DO - 10.1080/09538259.2021.1995147
M3 - Journal article
SN - 0953-8259
VL - 35
SP - 883
EP - 904
JO - Review of Political Economy
JF - Review of Political Economy
IS - 3
ER -