ABSTRACT
Many social studies evaluate projects with the purpose of justifying subsidies, tax expenditures, or other forms of encouragement to locate manufacturing activities in lagging regions. This chapter establishes the relationships hypothesized above between unemployment insurance, length of the unemployment period of temporary workers, and the social cost of labor (SCL). The paradigms show that unemployment cannot be defined simply by examining the demand and supply of labor; the impact of the state of labor markets upon the state of commodities markets must also be considered. The neoclassical paradigm consists mainly of frictional and structural unemployment where the "cause" largely consists of transaction and mobility costs. The Keynesian paradigm consists in cyclical unemployment. The effect of the availability of UIB upon the observed unemployment rate can be assessed through two theoretical approaches: the moral hazard approach; and the reservation wage approach.
