Optimal Unemployment Insurance with Monitoring and Sanctions

33 Pages Posted: 13 Dec 2001

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Peter Fredriksson

IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Uppsala University - Department of Economics

Bertil Holmlund

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Jan C. van Ours

Tilburg University - Department of Economics; University of Melbourne - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: November 2001

Abstract

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.

Keywords: Unemployment insurance, search, sanctions

JEL Classification: J64, J65, J68

Suggested Citation

Boone, Jan and Fredriksson, Peter and Holmlund, Bertil and van Ours, Jan C., Optimal Unemployment Insurance with Monitoring and Sanctions (November 2001). CEPR Discussion Paper No. 3082. Available at SSRN: https://ssrn.com/abstract=293630

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Peter Fredriksson

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Uppsala University - Department of Economics ( email )

SE-75120 Uppsala
Sweden
+46 18 471 7079 (Phone)
+46 18 471 1478 (Fax)

Bertil Holmlund

Uppsala University - Department of Economics ( email )

SE-75120 Uppsala
Sweden
+46 18 471 1122 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/holmlund/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jan C. Van Ours

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2880 (Phone)
+31 13 466 3042 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

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