Should Ui Benefits Really Fall Over Time?

28 Pages Posted: 18 Nov 2002

See all articles by John Hassler

John Hassler

Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

José Vincente Rodríguez Mora

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2002

Abstract

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in a tractable model allowing moral hazard, adverse selection and hidden savings. Analytical results show that when the search productivity of the unemployed is constant over the unemployment spell, benefits should typically increase or be constant. The only exception is when there is a moral hazard and no hidden saving. In general, adverse selection problems tend to generate increasing benefits, moral hazard problems tend to generate constant benefits, and decreasing search productivity tends to generate falling benefits.

Keywords: Unemployment Insurance, Moral Hazard, Adverse Selection

JEL Classification: J65, J64, E24

Suggested Citation

Hassler, John and Rodríguez Mora, José Vincente, Should Ui Benefits Really Fall Over Time? (November 2002). Available at SSRN: https://ssrn.com/abstract=351640 or http://dx.doi.org/10.2139/ssrn.351640

John Hassler (Contact Author)

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 816 2070 (Phone)
+46 816 1443 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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

José Vincente Rodríguez Mora

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 1755 (Phone)
+34 93 542 1746 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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