Unemployment Benefit Profile, Monitoring and Active Labor Market Policies: The Role of Normative Criteria
Posted: 26 Apr 2005
Date Written: April 2005
The design of the unemployment insurance system critically depends on the choice of the evaluation criterion. Indicators of labor market performance, welfarist and non-welfarist criteria are compared. They often lead to very different conclusions. This paper also highlights that the distributional consequences of reforms should attract attention. A declining time profile of benefit payments dominates a scheme with a constant replacement ratio. According to welfarist and non-welfarist criteria, this profile should be skill-specific. For reasonable values of the monitoring cost, relating this profile to job-search effort produces positive but limited effects. Analytical and simulation results show that the design of the UI system is affected by the presence of active programs.
Keywords: Unemployment insurance, sanctions, policy complementarities, wage bargaining, equilibrium unemployment, equilibrium search
JEL Classification: J65
Suggested Citation: Suggested Citation