Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180306
Authors: 
Mesén Vargas, Juliana
Van der Linden, Bruno
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7044
Abstract: 
This article analyzes the behavioral effects of unemployment benefits (UB) and it characterizes their optimal level when jobless people, who can carry out a subsistence activity, only survive if they have access to a minimum consumption level. Our model shows that if the level of UB is low enough, increasing its level or providing liquidity to the agent can decrease the duration in unemployment. Extensive numerical simulations indicate that the relationship between the level of the benefits and the probability of finding a formal job is frequently inverse U-shaped. We show that rewriting the insurance gain of the Baily-Chetty formula in terms of sufficient statistics requires specific modeling assumptions. The optimal replacement rate is generally higher than when subsistence is ignored.
Subjects: 
liquidity effect
scarcity
monetary costs
optimal insurance
JEL: 
D91
H21
J64
J65
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.