Optimal unemployment insurance with multiple applications

Shu Lin Wee

Journal of Monetary Economics, 2025, vol. 154, issue C

Abstract: This paper examines how unemployment transfers should be allocated over the business cycle. When risk-averse workers can submit multiple applications, the optimal UI policy is countercyclical. In contrast, optimal policy in a standard search model featuring one-to-one matching is procyclical. In the latter, more generous UI during a downturn discourages search effort, dampening job creation. In the former, decreased search effort aids job creation. Because firms cannot coordinate and commit to not making the same worker an offer, lower search effort by reducing the number of applications sent mitigates this coordination friction. This in turn boosts job creation incentives, supporting employment outcomes.

Keywords: Multiple applications; Optimal cyclicality; Unemployment insurance (search for similar items in EconPapers)
JEL-codes: E24 E32 J61 J65 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:154:y:2025:i:c:s0304393225000698

DOI: 10.1016/j.jmoneco.2025.103798

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