Aspects of Optimal Unemployment Insurance: Search, Leisure and Capital Market Imperfections

J. S. Flemming

No 214, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The object of this paper is to examine the importance of capital market assumptions. A special continuous-time model is developed in sections II-IV which is applicable to the perfect capital market case. It can also be used when there is no capital market at all (section IV). For 'reasonable' parameter values the optimal replacement rate (ratio of benefits to gross wage) appears to be less than 20% when capital markets are perfect but over 70% when they are non existent (i.e. no saving or dis-saving).

Date: 1977-11
Note: LS PE
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Published as Flemming, J. S. "Aspects of Optimal Unemployment Insurance: Search, Leisureand Capital Market Imperfections." Journal of Public Economics, Vol. 10, ( 1978), pp. 403-425.

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