Arbeitspapier

Unemployment, Crime and Social Insurance

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.

Language
Englisch

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

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

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

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Long, Iain W.
  • Polito, Vito
  • Cardiff University, Cardiff Business School

Time of origin

  • 2014

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