Unemployment, Crime and Social Insurance

Arbeitspapier

We study an individual's incentive to search for a job in the presence of random criminal opportunities. These opportunities extenuate moral hazard, as the individual sometimes commits crime rather than searching. Even when he searches, he applies less effort. We then revisit the design of optimal unemployment insurance in this environment. If the individual is more likely to remain unemployed and unpunished when he commits crime than when he searches for a job (as suggested by empirical studies), declining unemployment benefits reduce the payoff from crime relative to that from searching. Compared to the canonical models of optimal unemployment insurance, this provides a further incentive to reduce benefits over time.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Cardiff Economics Working Papers ; No. E2014/9

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Asymmetric and Private Information; Mechanism Design ; Social Security and Public Pensions ; Unemployment Insurance; Severance Pay; Plant Closings ; Illegal Behavior and the Enforcement of Law
• Subject: Unemployment insurance ; Moral hazard ; Crime ; Recursive contracts

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Long, Iain W. ; Polito, Vito
• Event: Veröffentlichung
• (who): Cardiff University, Cardiff Business School
• (where): Cardiff
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/109069
• Last update: 10.03.2025, 11:44 AM CET