On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse

Arbeitspapier

This paper revisits the normative properties of search-matching economies when homogeneous workers have concave utility functions and wages are bargained over. The optimal allocation of resources is characterized first when information is perfect and second when search effort is not observable. To decentralize these optima, employees should be unable to extract a rent when information is perfect. An appropriate positive rent is however needed in the second case. To implement these optima, non-linear income taxation is a key complement to unemployment insurance. According to the level of the workers? bargaining power, taxation has to be progressive or regressive. These properties are also studied through numerical simulations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1172

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Asymmetric and Private Information; Mechanism Design ; Unemployment: Models, Duration, Incidence, and Job Search ; Unemployment Insurance; Severance Pay; Plant Closings ; Mobility, Unemployment, and Vacancies: Public Policy
• Subject: unemployment ; non-linear taxation ; unemployment benefits ; moral hazard ; search ; matching ; Arbeitslosigkeit ; Arbeitsangebot ; Arbeitslosenversicherung ; Moral Hazard ; Risikoaversion ; Theorie ; Matching

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): van der Linden, Bruno ; Lehmann, Etienne
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/20412
• Last update: 10.03.2025, 11:45 AM CET