High Unemployment Insurance Benefits Employment and the Economy

According to a new study by Dr. Jean-Michel Grandmont published in the International Journal of Economic Theory, higher unemployment insurance boosts the economy. What the study discovered was, even in times of higher unemployment, employers hesitate to cut wages for fear it will decrease performance and productivity. Despite the higher cost of unemployment insurance, employers are not likely to cut wages or reduce hiring. And, with higher benefits, unemployed workers are more likely to continue having reasonable purchasing power, thus bouying the economy and keeping production and productivity up.

The study, entitled "Negishi-Solow Efficiency Wages, Unemployment Insurance and Dynamic Deterministic Indeterminacy" was published by Wiley-Blackwell and can be ordered through the International Journal of Economic Theory site.