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Optimal Unemployment Insurance with Monitoring and Sanctions

Jan Boone, Peter Fredriksson, Bertil Holmlund and Jan van Ours ()

No 401, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is deemed insufficient. We find that introducing monitoring and sanctions represents a welfare improvement for reasonable estimates of monitoring costs; this conclusion holds both relative to a system featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt. The optimal sanction rates implied by our calibrated model are much higher than the sanction rates typically observed in European labor markets.

Keywords: Unemployment insurance; search; sanctions (search for similar items in EconPapers)
JEL-codes: J64 J65 J68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-lab and nep-ltv
Date: 2001-11
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Published in: Economic Journal, 2007, 117 (518), 399-421

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http://ftp.iza.org/dp401.pdf (application/pdf)

Related works:
Journal Article: Optimal Unemployment Insurance with Monitoring and Sanctions (2007) Downloads
Working Paper: Optimal unemployment insurance with monitoring and sanctions (2007) Downloads
Working Paper: Optimal unemployment insurance with monitoring and sanctions (2002) Downloads
Working Paper: Optimal Unemployment Insurance with Monitoring and Sanctions (2001) Downloads
Working Paper: Optimal Unemployment Insurance with Monitoring and Sanctions (2001) Downloads
Working Paper: Optimal Unemployment Insurance with Monitoring and Sanctions (2001) Downloads
Working Paper: Optimal Unemployment Insurance with Monitoring and Sanctions (2001) Downloads
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