1) Define the problem of the effect of unemployment benefits on unemployment.
2) Offer a solution such as the EITC we have in the text book.
3) Find literature discussing the benefits of unemployment programs that aim to combat the disincentive to work created by unemployment benefits.
This is great discussion, let me try to separate issues we are discussing here:
– ceteris paribus means: other conditions remaining the same. This is used in a Partial Analysis. For example, “assuming that interest rates remain the same during the period (ceteris paribus) the rate of house sales will probably increase given the increase in individuals income with the increased growth rate”. It refers more to ‘measurable conditions that we are not considering now’. I would not use this term to define the fact that utility may vary between individuals.
– Utility will differ between different individuals. Some individuals would be willing to pay more for the extra unit of the good and these would be part of the consumer surplus. The market will operate where supply and demand find an equilibrium point.
– Niall, you can probably define two consequences from unemployment benefits: (1) people willing to withdraw from labour market given the opportunity cost (leisure), and (2) individuals remaining longer under unemployment benefits given the disincentive to return to the labour market. The later may involve issues with the labour market while the former addresses more objectively the theory we are studying. Maybe just stick to the first, other wise you end up writing a thesis, like Adam said.
- Different approaches used in different countries is most interesting indeed, Emma, but you have a word limit. Maybe used it in the last part, when you are discussing the results of using a program that creates incentives to return to work.
Now tell me if these comments make sense, there are only so many perspectives the words can reach.
Textbook used for course:
Friedman, L.S. (2002). The Microeconomics of Public Policy Analysis. Princeton: Princeton University Press.