Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/21261
Authors: 
Boone, Jan
Fredriksson, Peter
Holmlund, Bertil
van Ours, Jan C.
Year of Publication: 
2001
Series/Report no.: 
IZA Discussion paper series 401
Abstract: 
This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is deemed insufficient. We find that introducing monitoring and sanctions represents a welfare improvement for reasonable estimates of monitoring costs; this conclusion holds both relative to a system featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt. The optimal sanction rates implied by our calibrated model are much higher than the sanction rates typically observed in European labor markets.
Subjects: 
Unemployment insurance
search
sanctions
JEL: 
J65
J64
J68
Document Type: 
Working Paper

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