Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208089 
Year of Publication: 
2019
Series/Report no.: 
Discussion Paper No. 189
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
We empirically analyze the optimal mix and optimal generosity of unemployment insurance and social assistance programs. To do so, we specify a structural life-cycle model of the labor supply, savings, and social assistance claiming decisions of singles and married couples. Partial insurance against wage and employment shocks is provided by social programs, savings, and the labor supplies of all adult household members. We show that the optimal policy mix is dominated by moderately generous social assistance, which guarantees a permanent universal minimum household income, with only a minor role for temporary earnings-related unemployment insurance. The optimal amount of social assistance is heavily influenced by income pooling in married households. This pooling provides partial insurance against negative economic shocks, reducing the optimal generosity of social assistance.
Subjects: 
Unemployment insurance
Social assistance
Design of benefit programs
Life-cycle labor supply
Family labor supply
Intra-household insurance
Household savings
Employment risk
Added worker effect
JEL: 
J18
J68
H21
I38
Document Type: 
Working Paper

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