The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
The paper examines the employment and unemployment implications of permitting unemployed people to use part of their unemployment benefits to provide employment vouchers to the firms that hire them. This opportunity to transfer unemployment benefits into employment subsidies--“benefit transfers” for short--would help replace the unemployment trap by an incentive to work. The vouchers rise with people’s unemployment durations and with the amount of training provided. The policy would be costless to the government since the cost of the employment vouchers is set equal to the amount saved on unemployment benefits. It would not be inflationary since the long-term unemployed, on whom the vouchers are targeted, have little influence on wage setting.