Optimal Umemployment Insurance Design: Time Limits, Monitoring, or Workfare?
31 Pages Posted: 23 Aug 2003
Date Written: August 2003
Abstract
This paper analyses crucial design features of unemployment insurance (UI) policies. We examine three different means of improving the efficiency of UI: the duration of benefit payments, monitoring in conjunction with sanctions, and workfare. To that end we develop a quantitative model of equilibrium unemployment. The model features worker heterogeneity, which takes the form of differences in preferences for leisure. All the instruments are ways of limiting the duration of UI benefit receipt and the model can be used to compare them in a coherent fashion. The analysis suggests that a system with monitoring and sanctions restores search incentives most effectively, since it brings additional incentives to search actively so as to avoid the sanction. Therefore, the UI provider can offer a more generous UI replacement rate in a system with monitoring and sanctions than in the other two systems. Workfare appears to be inferior to the other two systems.
Keywords: unemployment insurance, search, monitoring, sanctions, workfare
JEL Classification: J64, J65, J68
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Jaap H. Abbring, Gerard J. Van Den Berg, ...
-
Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States
By Orley Ashenfelter, David Ashmore, ...
-
The Effect of Benefit Sanctions on the Duration of Unemployment
By Rafael Lalive, Jan C. Van Ours, ...
-
The Effect of Benefit Sanctions on the Duration of Unemployment
By Rafael Lalive, Jan C. Van Ours, ...
-
By Dan Black, Jeffrey A. Smith, ...
-
Improving Incentives in Unemployment Insurance: A Review of Recent Research
By Peter Fredriksson and Bertil Holmlund
-
Improving Incentives in Unemployment Insurance: A Review of Recent Research
By Peter Fredriksson and Bertil Holmlund
-
Education and Unemployment of Women
By Jacob Mincer