Optimal Unemployment Insurance Requirements

Gustavo de Souza and André Victor Doherty Luduvice

No 22-10R, Working Papers from Federal Reserve Bank of Cleveland

Abstract: In the US, workers must satisfy two requirements to receive unemployment insurance (UI): a tenure requirement of a minimum work spell and a monetary requirement of past minimum earnings. Using discontinuity of UI rules at state borders, we find that the monetary requirement decreases the number of employers and the share of part-time workers, while the tenure requirement has the opposite effect. In a quantitative model, the monetary requirement induces workers to stay longer in unemployment because low-paying jobs are not covered by UI. Since it mitigates moral hazard, the optimal UI design has a high monetary requirement.

Keywords: Unemployment Insurance; UI Eligibility; Optimal UI (search for similar items in EconPapers)
JEL-codes: E24 E61 J65 (search for similar items in EconPapers)
Pages: 55
Date: 2022-04-19, Revised 2023-03-06
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
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DOI: 10.26509/frbc-wp-202210r

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