Optimal Size and Intensity of Job Search Assistance Programs

Evelyn Ribi ()

University of St. Gallen Department of Economics working paper series 2009 from Department of Economics, University of St. Gallen

Abstract: This paper derives the welfare optimal size and intensity of job search assistance programs in a general equilibrium model where the labor market is affected by search frictions. Both instruments have a priori ambiguous fiscal implications: their direct employment stimulating effects broaden the base of the labor income tax and increase revenues, while also incurring direct costs. At optimal levels, the policy instruments trade off the positive effects on the participants against a marginal increase in taxes, which distorts employment decisions and potentially labor market tightness. We find that the higher unemployment insurance benefits, the lower is the optimal program intensity. Further, the introduction of a job search assistance program is more likely to raise welfare if it is highly effective at improving participants' job search skills, direct program costs are low and if the general level of taxation in the economy and thus the labor market participation tax are high.

Keywords: Job search assistance; optimal size; optimal intensity; unemployment insurance (search for similar items in EconPapers)
JEL-codes: J64 J68 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-08
New Economics Papers: this item is included in nep-dge, nep-ias and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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