Optimal Unemployment Insurance with Monitoring and Sanctions

Arbeitspapier

This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is deemed insufficient. We find that introducing monitoring and sanctions represents a welfare improvement for reasonable estimates of monitoring costs; this conclusion holds both relative to a system featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt. The optimal sanction rates implied by our calibrated model are much higher than the sanction rates typically observed in European labor markets.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2001:20

Classification and Topics

• Classification: Wirtschaft ; Unemployment: Models, Duration, Incidence, and Job Search ; Unemployment Insurance; Severance Pay; Plant Closings ; Mobility, Unemployment, and Vacancies: Public Policy
• Subject: Unemployment insurance ; search ; sanctions ; Arbeitslosenversicherung ; Arbeitsuche ; Kontrolle ; Optimale Besteuerung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boone, Jan ; Fredriksson, Peter ; Holmlund, Bertil ; van Ours, Jan
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/82859
• URN: urn:nbn:se:uu:diva-2237