Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315920 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1667
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
When searching for employment, workers consider non-wage job characteristics, such as effort requirements or amenities. We study an environment where unemployed workers search for jobs of different quality in a labor market characterized by directed search. In equilibrium, firms are more likely to post vacancies for low-quality jobs, as these are more profitable. Hence, high-quality jobs are hard to come across. The non-observability of these employment contracts influences the optimal unemployment insurance (UI) program, leading to distortionary taxation. Calibrating the model to the U.S. economy, we find that non-observability of employment contracts results in faster declining UI benefits, steeper taxes upon re-employment, distortionary taxation, and a 10.5% costlier program than an observable contract scenario providing equal welfare.
Subjects: 
Unemployment insurance
Directed search
Intensive margin
Amenities,Hidden savings
JEL: 
H21
J64
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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