Optimal Workfare with Voluntary and Involuntary Unemployment

Arbeitspapier

This paper studies whether a benevolent government should use workfare as part of its unemployment benefit policy. We consider a population composed of employed and unemployed workers as well as individuals who do not seek employment. Job search behavior is private information implying that voluntarily unemployed individuals can claim unemployment insurance (UI) benefits intended for unemployed workers. As a consequence, pecuniary benefit schemes underinsure workers against unemployment. We show that requiring unproductive activities (workfare) in exchange for UI benefits may create a Pareto improvement by facilitating better unemployment insurance for workers, and we characterize the situations where this is the case.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EPRU Working Paper Series ; No. 2003-15

Classification and Topics

• Classification: Wirtschaft ; Unemployment Insurance; Severance Pay; Plant Closings
• Subject: unemployment insurance ; workfare ; Pareto optimality ; Aktivierende Sozialhilfe ; Arbeitslosigkeit ; Pareto-Optimum

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Thustrup Kreiner, Claus ; Tranæs, Torben
• Event: Veröffentlichung
• (who): University of Copenhagen, Economic Policy Research Unit (EPRU)
• (where): Copenhagen
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/82040
• Last update: 10.03.2025, 11:44 AM CET