The Optimal Duration of Unemployment Benefits *

Gilles Joseph () and Paul-Emile Maingé ()
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Gilles Joseph: LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles
Paul-Emile Maingé: MEMIAD - Management, économie, modélisation, informatique et aide à la décision [UR7_3] - UA - Université des Antilles

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Abstract: This paper studies the optimal duration of unemployment insurance (UI) benefits in a basic job search model where a risk neutral UI agency can not monitor the search effort of risk-averse workers. Social assistance payments are taken as exogenous by the unemployment agency which chooses optimally the level of UI benefits, the date of their exhaustion and the level of the financing tax. So, due to possible finite values of the duration of unemployment benefits, the resulting agency's problem brings nonstationarity complexities that are usually deemed intractable in models where utility and search costs functions are nonlinear. We then propose a new strategy, based on the study of the geometric properties of the set of constraints, and explicit formal conditions, with very general utility and search costs functions , for obtaining a zero, positive or infinite optimal duration of UI.

Keywords: Moral hazard; Job search; Potential benefits duration; Unemployment insurance (search for similar items in EconPapers)
Date: 2018-03-02
New Economics Papers: this item is included in nep-dge, nep-ias and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-01722116
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