On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse

Etienne Lehmann () and Bruno Van der Linden

No 1172, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper revisits the normative properties of search-matching economies when homogeneous workers have concave utility functions and wages are bargained over. The optimal allocation of resources is characterized first when information is perfect and second when search effort is not observable. To decentralize these optima, employees should be unable to extract a rent when information is perfect. An appropriate positive rent is however needed in the second case. To implement these optima, non-linear income taxation is a key complement to unemployment insurance. According to the level of the workers’ bargaining power, taxation has to be progressive

Keywords: matching; moral hazard; unemployment benefits; non-linear taxation; unemployment; search (search for similar items in EconPapers)
JEL-codes: D82 H21 J64 J65 J68 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2004-06
New Economics Papers: this item is included in nep-lab and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Public Economic Theory, 2007, 9 (5), 867-884

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Related works:
Journal Article: On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse (2007)
Working Paper: On the Optimality of Search Matching Equilibrium when workers are risk adverse (2004)
Working Paper: On the optimality of search matching equilibrium when workers are risk averse (2002)
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