Abstract:
This paper develops a general equilibrium endogenous growth model in an
overlapping generations framework, and compares, in terms of economic growth, a
passive unemployment policy (unemployment insurance) with an active
unemployment policy (government expenditures targeted towards improving the jobfinding
probability of an unemployed). Besides, the standard result of unemployment
being growth reducing, under realistic parameterization, we show that the
government, under an active policy, can generate higher growth without any
compromise on its own consumption, when compared to the unemployment benefit
regime. The result, however, depends crucially on the efficiency with which the
resources are spent in creating employment.
