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Search and Work in Optimal Welfare Programs

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  • Pavoni, Nicola
  • Setty, Ofer
  • Violante, Giovanni L.

Abstract

Actual welfare programs often feature work requirements in exchange for benefits and job-search assistance. We study the optimal design of welfare programs for the unemployed when the principal/ government can solicit either job-search effort or work effort from the agent or, alternatively, can relieve the agent from supplying effort and search on her behalf. Our main result is that when the generosity of the welfare program (i.e., its initial promised utility) is low, then the optimal program should be based on work activities. In contrast, when the initial generosity, or available budget, is high the optimal program should be based on search —and search assistance— activities.

Suggested Citation

  • Pavoni, Nicola & Setty, Ofer & Violante, Giovanni L., 2010. "Search and Work in Optimal Welfare Programs," Foerder Institute for Economic Research Working Papers 275749, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275749
    DOI: 10.22004/ag.econ.275749
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    Cited by:

    1. Dominik Sachs & Sebastian Findeisen, 2016. "Optimal Financial Aid Policies for Students," 2016 Meeting Papers 1421, Society for Economic Dynamics.
    2. Setty, Ofer, 2011. "Unemployment Accounts," Foerder Institute for Economic Research Working Papers 275748, Tel-Aviv University > Foerder Institute for Economic Research.
    3. Claudio Michelacci & Hernán Ruffo, 2015. "Optimal Life Cycle Unemployment Insurance," American Economic Review, American Economic Association, vol. 105(2), pages 816-859, February.
    4. Arni, Patrick & van den Berg, Gerard J. & Lalive, Rafael, 2015. "Treatment versus Regime Effects of Carrots and Sticks," IZA Discussion Papers 9457, Institute of Labor Economics (IZA).
    5. Sebastian Koehne & Moritz Kuhn, 2015. "Should unemployment insurance be asset-tested?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 575-592, July.
    6. Nicola Pavoni & Ofer Setty & Giovanni Violante, 2016. "The design of 'soft' welfare-to-work programs," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 160-180, April.
    7. Johannes F. Schmieder & Till von Wachter & Stefan Bender, 2013. "The Causal Effect of Unemployment Duration on Wages: Evidence from Unemployment Insurance Extensions," NBER Working Papers 19772, National Bureau of Economic Research, Inc.
    8. Ortego-Marti, Victor, 2017. "Loss of skill during unemployment and TFP differences across countries," European Economic Review, Elsevier, vol. 100(C), pages 215-235.
    9. Wang, Cheng & Williamson, Stephen, 1996. "Unemployment insurance with moral hazard in a dynamic economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 1-41, June.
    10. Ortego-Marti, Victor, 2017. "The Cyclical Behavior Of Unemployment And Vacancies With Loss Of Skills During Unemployment," Macroeconomic Dynamics, Cambridge University Press, vol. 21(6), pages 1277-1304, September.
    11. Findeisen, Sebastian & Sachs, Dominik, 2015. "Designing efficient college and tax policies," Working Papers 15-09, University of Mannheim, Department of Economics.
    12. Nicholas Lawson, 2023. "Optimal unemployment policy," Economic Inquiry, Western Economic Association International, vol. 61(3), pages 675-692, July.
    13. Sergio Cappellini, 2022. "Optimal Unemployment Insurance with Worker Profiling," "Marco Fanno" Working Papers 0294, Dipartimento di Scienze Economiche "Marco Fanno".

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    More about this item

    Keywords

    Financial Economics; Labor and Human Capital;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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