The Simple Economics of Benefit Transfers

Author/Editor:

Dennis J. Snower

Publication Date:

January 1, 1995

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits into employment subsidies--“benefit transfers” for short--would help replace the unemployment trap by an incentive to work. The vouchers rise with people’s unemployment durations and with the amount of training provided. The policy would be costless to the government since the cost of the employment vouchers is set equal to the amount saved on unemployment benefits. It would not be inflationary since the long-term unemployed, on whom the vouchers are targeted, have little influence on wage setting.

Series:

Working Paper No. 95/5

Subject:

English

Publication Date:

January 1, 1995

ISBN/ISSN:

9781451842128/1018-5941

Stock No:

WPIEA0051995

Format:

Paper

Pages:

42

Please address any questions about this title to publications@imf.org