Optimal unemployment insurance design: time limits, monitoring, or workfare?

Peter Fredriksson and Bertil Holmlund ()

No 2005:13, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: This paper analyses crucial design features of unemployment insurance (UI) policies. We examine three different means of improving the efficiency of UI: the duration of benefit payments, monitoring in conjunction with sanctions, and workfare. To that end we develop a quantitative model of equilibrium unemployment. The model features worker heterogeneity in preferences for leisure. The numerical analysis suggests that a system with monitoring and sanctions restores search incentives most effectively, since it brings additional incentives to search actively so as to avoid the sanction. Therefore, the UI provider can offer a more generous UI replacement rate in a system with monitoring and sanctions than in the other two systems. Workfare appears to be inferior to the other two systems.

Keywords: Unemployment insurance; search equilibrium; time limits; monitoring and sanctions; workfare (search for similar items in EconPapers)
JEL-codes: J64 J68 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2005-05-12
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published in International Tax and Public Finance, 2006, pages 565-585.

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Related works:
Journal Article: Optimal unemployment insurance design: Time limits, monitoring, or workfare? (2006)
Working Paper: Optimal Unemployment Insurance Design: Time Limits, Monitoring, or Workfare? (2003)
Working Paper: Optimal Unemployment Insurance Design:Time Limits, Monitoring, or Workfare? (2003)
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