question archive On average, nations in Europe pay higher unemployment benefits for longer periods of time than does the United States
On average, nations in Europe pay higher unemployment benefits for longer periods of time than does the United States
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On average, nations in Europe pay higher unemployment benefits for longer periods of time than does the United States. How do you suppose this would impact the unemployment rates in these nations? Explain which type of unemployment you think is most directly affected by the size and duration of unemployment benefits.
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Answer: Higher unemployment rates.
We would expect to see higher unemployment rates in Europe. This is because the labor market is less flexible, which means it will take longer for cyclical unemployment to come down. This happens because the incentive to find a job isn't as high the longer the duration of unemployment benefits are and the more generous they are. Structural unemployment shouldn't be too affected since it is mostly caused by a mismatch of skills and not a lack of desire to work.
