A Positive Theory of Geographic Mobility and Social Insurance

John Hassler and Sevi Rodríguez Mora

No 97, Working Papers from Barcelona School of Economics

Abstract: Evidence suggests that unemployed individuals sometimes can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity arises only for some individuals and the identity of those is unobservable. Unemployment insurance should then be designed to induce individuals to exploit existing opportunities to move or retrain without excessively diminishing the insurance value for the remaining unemployed. This problem has been neglected in previous literature on unemployment insurance design and we show that it may have important consequences. In particular, we derive closed-form solutions, showing that unemployment benefits should increase over the unemployment spell, having an initial period with low benefits and a substantial increase after this period has expired.

Keywords: Unemployment benefits; search; moral hazard; adverse selection (search for similar items in EconPapers)
JEL-codes: E24 J64 J65 (search for similar items in EconPapers)
Date: 2003-12
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Related works:
Working Paper: A Positive Theory of Geographic Mobility and Social Insurance (2015)
Journal Article: A POSITIVE THEORY OF GEOGRAPHIC MOBILITY AND SOCIAL INSURANCE (2005)
Working Paper: A Positive Theory of Geographic Mobility and Social Insurance (2002)
Working Paper: A positive theory of geographical mobility and social insurance (2002)
Working Paper: A Positive Theory of Geographic Mobility and Social Insurance (2001)
Working Paper: A positive theory of geographic mobility and social insurance (2001)
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