Figuring out the impact of hidden savings on optimal unemployment insuranc
AbstractIn this paper, I consider the problem of optimal unemployment insurance in a world in which the unemployed agent's job-finding effort is unobservable and his level of savings is unobservable. I show that the first-order approach is not always valid for this problem, and I argue that the available recursive procedures are not currently computationally feasible. Nonetheless, for the case in which the disutility of effort is linear, I am able to provide a complete characterization of the optimal contract: the agent's consumption is constant while he is unemployed, and jumps up to a higher constant and history-independent level of consumption when he finds a job. (Copyright: Elsevier)
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 506439000000000291.
Date of creation: 11 Dec 2010
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Other versions of this item:
- Narayana Kocherlakota, 2004. "Figuring out the Impact of Hidden Savings on Optimal Unemployment Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 541-554, July.
- NEP-ALL-2010-12-18 (All new papers)
- NEP-IAS-2010-12-18 (Insurance Economics)
- NEP-LAB-2010-12-18 (Labour Economics)
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