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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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Publisher Info
Paper provided by CESifo Group Munich 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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    Other versions:
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    Other versions:
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    Other versions:
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    Other versions:
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  33. repec:rus:hseeco:10108 is not listed on IDEAS
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  35. 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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    Other versions:
  39. 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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