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Unemployment Compensation and High European Unemployment

April 3, 2009

Generous unemployment benefits lie at the heart of the conventional explanation for persistent high unemployment.

The micro evidence suggests modest effects of changes in generosity, but there are reasons to doubt that the impacts on national unemployment rates are consequential. The authors take advantage of newly released and much improved net replacement rate indicators from the OECD, which show little correlation with either gross replacement rates or with unemployment and employment rates.

Authors: David Howell and Miriam Rehm
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