Optimal unemployment insurance in search equilibrium
1998 (English)Report (Other academic)
Should unemployment compensation be paid indefinitely at a fixed rate or should it decline (or increase) over a worker’s unemployment spell? We examine these issues using an equilibrium model of search unemployment. The model features worker-firm bargaining over wages, free entry of new jobs, and endogenous search effort among the unemployed. The main result is that an optimal insurance program implies a declining sequence of unemployment compensation over the spell of unemployment. Numerical calibrations of the model suggest that there are non-trivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system.
Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen , 1998. , 33 p.
Working paper, ISSN 0284-2904
IdentifiersURN: urn:nbn:se:uu:diva-2402ISBN: 99-2580988-6OAI: oai:DiVA.org:uu-2402DiVA: diva2:128663