Business Cycle Dependent Unemployment Insurance - A Simulation on the Swedish Labour Market

Abstract: This thesis answers the question whether a business cycle dependent unemployment insurance would improve the welfare compared to the current Swedish system. Using recursive macroeconomics three di erent unemployment insurance programs are simulated. The simulation uses business cycle data from Sweden as a proxy for the labour market tightness. The program with changing duration of bene ts provides the same utility as the current system, but to a lower cost, since it incentives the agents to search persistently for jobs early in their unemployment spell in a boom and at the same time provides them with a high insurance in a recession.