Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82040
Authors: 
Thustrup Kreiner, Claus
Tranæs, Torben
Year of Publication: 
2003
Series/Report no.: 
EPRU Working Paper Series 2003-15
Abstract: 
This paper studies whether a benevolent government should use workfare as part of its unemployment benefit policy. We consider a population composed of employed and unemployed workers as well as individuals who do not seek employment. Job search behavior is private information implying that voluntarily unemployed individuals can claim unemployment insurance (UI) benefits intended for unemployed workers. As a consequence, pecuniary benefit schemes underinsure workers against unemployment. We show that requiring unproductive activities (workfare) in exchange for UI benefits may create a Pareto improvement by facilitating better unemployment insurance for workers, and we characterize the situations where this is the case.
Subjects: 
unemployment insurance
workfare
Pareto optimality
JEL: 
H2
J65
Document Type: 
Working Paper

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