Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/109069
Authors: 
Long, Iain W.
Polito, Vito
Year of Publication: 
2014
Series/Report no.: 
Cardiff Economics Working Papers E2014/9
Abstract: 
We study an individual's incentive to search for a job in the presence of random criminal opportunities. These opportunities extenuate moral hazard, as the individual sometimes commits crime rather than searching. Even when he searches, he applies less effort. We then revisit the design of optimal unemployment insurance in this environment. If the individual is more likely to remain unemployed and unpunished when he commits crime than when he searches for a job (as suggested by empirical studies), declining unemployment benefits reduce the payoff from crime relative to that from searching. Compared to the canonical models of optimal unemployment insurance, this provides a further incentive to reduce benefits over time.
Subjects: 
Unemployment insurance
Moral hazard
Crime
Recursive contracts
JEL: 
C61
D82
H55
J65
K42
Document Type: 
Working Paper

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