Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82887
Authors: 
Fredriksson, Peter
Holmlund, Bertil
Year of Publication: 
1998
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 1998:2
Abstract: 
Should unemployment compensation be paid indefinitely at a fixed rate or should it decline (or increase) over a workerÂ’s unemployment spell? We examine these issues using an equilibrium model of search unemployment. The model features worker-firm bargaining over wages, free entry of new jobs, and endogenous search effort among the unemployed. The main result is that an optimal insurance program implies a declining sequence of unemployment compensation over the spell of unemployment. Numerical calibrations of the model suggest that there are non-trivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system.
Subjects: 
Job search
Unemployment
Unemployment insurance
JEL: 
D83
H21
J65
Document Type: 
Working Paper

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