TY - JOUR
T1 - Macroeconomic aspects of unemployment benefits: Evaluating the Danish policy
AU - Byrialsen, Mikael Randrup
AU - Raza, Hamid
AU - Thomsen, Simon Fløj
PY - 2024
Y1 - 2024
N2 - This article provides an assessment of the Danish public policy of lowering unemployment benefits, adopted by the Danish government in the tax reform of 2012. To do so, we employ a stock-flow consistent model in which we incorporate the central features of the Danish labour market and the unemployment insurance system. We estimate the model using quarterly data over the period 2005Q4–2020Q1. To evaluate the effects of an unemployment insurance policy, we perform counterfactual analysis by reversing public policy in relation to unemployment insurance and compare the results with the original (baseline) scenario containing the policy effects. Overall, our findings suggest that when the aggregate demand channel, amongst other relevant macroeconomic channels, is included in the assessment, the effects of unemployment benefits on economic growth, employment, and fiscal balance tend to be weaker. These findings clearly question the political decision of suppressing unemployment benefits in general and more specifically in countries with low unemployment rates such as Denmark.
AB - This article provides an assessment of the Danish public policy of lowering unemployment benefits, adopted by the Danish government in the tax reform of 2012. To do so, we employ a stock-flow consistent model in which we incorporate the central features of the Danish labour market and the unemployment insurance system. We estimate the model using quarterly data over the period 2005Q4–2020Q1. To evaluate the effects of an unemployment insurance policy, we perform counterfactual analysis by reversing public policy in relation to unemployment insurance and compare the results with the original (baseline) scenario containing the policy effects. Overall, our findings suggest that when the aggregate demand channel, amongst other relevant macroeconomic channels, is included in the assessment, the effects of unemployment benefits on economic growth, employment, and fiscal balance tend to be weaker. These findings clearly question the political decision of suppressing unemployment benefits in general and more specifically in countries with low unemployment rates such as Denmark.
KW - Unemployment benefits
KW - small open economies
KW - stock-flow consistent models
UR - http://www.scopus.com/inward/record.url?scp=85188303352&partnerID=8YFLogxK
U2 - https://doi.org/10.1080/09538259.2024.2303665
DO - https://doi.org/10.1080/09538259.2024.2303665
M3 - Journal article
SN - 0953-8259
JO - Review of Political Economy
JF - Review of Political Economy
ER -