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Optimal Unemployment Insurance with Monitoring and Sanctions

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Author Info
Boone, Jan
Fredriksson, Peter
Holmlund, Bertil
van Ours, Jan

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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.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 616.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_616

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Related research
Keywords: unemployment insurance search sanctions

Other versions of this item:

Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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  4. Phelps, Edmund S & Zoega, Gylfi, 1998. "Natural-Rate Theory and OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 782-801, May. [Downloadable!] (restricted)
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  9. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 100(3), pages 593-610, September. [Downloadable!] (restricted)
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  15. Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 1998. "Punitive Sanctions and the Transition Rate from Welfare to Work," Tinbergen Institute Discussion Papers 98-076/3, Tinbergen Institute. [Downloadable!]
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  16. Kolm, Ann-Sofie, 2000. " Labour Taxation in a Unionised Economy with Home Production," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(4), pages 689-705, December. [Downloadable!] (restricted)
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  24. Lindeboom, Maarten & Portrait, France & van den Berg, Gerard, 2002. "An econometric analysis of the mental-health effects of major events in the life of older individuals," Working Paper Series 2002:19, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  25. Sacklén, Hans, 2002. "An evaluation of the Swedish trainee replacement schemes," Working Paper Series 2002:7, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  26. Johansson, Kerstin, 2002. "Labor Market Programs, the Discouraged-Worker Effect, and Labor Force Participation," Working Paper Series 2002:16, Uppsala University, Department of Economics. [Downloadable!]
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  28. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January. [Downloadable!] (restricted)
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  30. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Blackwell Publishing, vol. 11(3), pages 267-95, September. [Downloadable!] (restricted)
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  32. repec:rus:hseeco:10108 is not listed on IDEAS
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  34. Abbring, Jaap H. & van den Berg, Gerard J., 2002. "Dynamically assigned treatments: duration models, binary treatment models, and panel data models," Working Paper Series 2002:20, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  37. Bertil Holmlund, 2001. "Labor Taxation in Search Equilibrium with Home Production," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  38. Boone, J. & Fredriksson, P. & Holmlund, B. & Ours, J.C. van, 2001. "Optimal unemployment insurance with monitoring and sanctions," Discussion Paper 85, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2002. "Optimal unemployment insurance with monitoring and sanctions," Working Paper Series 2002:21, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  2. Bruno, VAN DER LINDEN, 2003. "Unemployment insurance and training in an equilibrium matching model with heterogeneous agents," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2003001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  3. Solenne Tanguy, 2004. "Recherche d'emploi : entre assurance et incitation," Cahiers de la Maison des Sciences Economiques v04034, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  4. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Working Paper Series 2003:10, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  5. Michael Svarer, 2007. "The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark," Economics Working Papers 2007-10, School of Economics and Management, University of Aarhus. [Downloadable!]
  6. Boone, J. & Sadrieh, A. & van Ours, J. C., 2004. "Experiments on unemployment benefit sanctions and job search behavior," Discussion Paper 8, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  7. Solenne Tanguy, 2005. "Gains de productivité et contrôle de la recherche d'emploi," Cahiers de la Maison des Sciences Economiques v06028, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  8. Müller, Kai-Uwe & Steiner, Viktor, 2008. "Imposed Benefit Sanctions and the Unemployment-to-Employment Transition: The German Experience," IZA Discussion Papers 3483, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Bertil Holmlund, 2004. "Sickness Absence and Search Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  10. Alan Manning, 2005. "You Cant Always Get What You Want: the Impact of the Jobseekers Allowance," CEP Discussion Papers dp0697, Centre for Economic Performance, LSE. [Downloadable!]
  11. Lollivier, Stefan & Rioux, Laurence, 2005. "A Structural Non-Stationary Model of Job Search: Stigmatization of the Unemployed by Job Offers or Wage Offers?," CEPR Discussion Papers 5108, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Kai-Uwe Müller & Viktor Steiner, 2008. "Imposed Benefit Sanctions and the Unemployment-to-Employment Transition : The German Experience," Discussion Papers of DIW Berlin 792, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  13. Peter Fredriksson & Bertil Holmlund, 2003. "Optimal Unemployment Insurance Design: Time Limits, Monitoring, or Workfare?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  14. Neugart, Michael & Storrie, Donald, 2002. "Temporary work agencies and equilibrium unemployment," Working Papers in Economics 83, Göteborg University, Department of Economics. [Downloadable!]
  15. Frederick VAN DER PLOEG, 2004. "DO SOCIAL POLICIES HARM EMPLOYMENT? Second-best effects of taxes and benefits on labor markets," Economics Working Papers ECO2004/11, European University Institute. [Downloadable!]
  16. E. Lehmann & B. Van Der Linden, 2004. "On the Optimality of Search Matching Equilibrium when workers are risk adverse," Working Papers ERMES 0406, ERMES, University Paris 2. [Downloadable!]
    Other versions:
  17. Michael Svarer, 2007. "The Effect of Sanctions on the Job Finding Rate: Evidence from Denmark," IZA Discussion Papers 3015, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Pavoni, Nicola & Violante, Giovanni L, 2006. "Optimal Welfare-to-Work Programs," CEPR Discussion Papers 5937, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  19. Ours, Jan C. van, 2006. "Leaving "Hotel California" : how incentives affect flows of benefit recipients in the Netherlands," Discussion Paper 116, Tilburg University, Center for Economic Research. [Downloadable!]
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