Optimal Unemployment Insurance in Search Equilibrium

Arbeitspapier

Should unemployment compensation be paid indefinitely at a fixed rate or should it decline (or increase) over a worker’s unemployment spell? We examine these issues using an equilibrium model of search unemployment. The model features worker-firm bargaining over wages, free entry of new jobs, and endogenous search effort among the unemployed. The main result is that an optimal insurance program implies a declining sequence of unemployment compensation over the spell of unemployment. Numerical calibrations of the model suggest that there are non-trivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1998:2

Classification and Topics

• Classification: Wirtschaft ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: Job search ; Unemployment ; Unemployment insurance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fredriksson, Peter ; Holmlund, Bertil
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 1998

Further information

• Handle: http://hdl.handle.net/10419/82887
• Last update: 10.03.2025, 11:43 AM CET