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Optimal Unemployment Insurance for Older Workers

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Author Info

  • Hairault, Jean-Olivier
  • Langot, François
  • Ménard, Sébastien
  • Sopraseuth, Thepthida

Abstract

This paper shows that optimal unemployment insurance contracts are age-dependent. Older workers have only a few years left on the labor market prior to retirement. This short horizon implies a more decreasing replacement ratio. However, there is a sufficiently short distance to retirement for which flat unemployment benefits can be the optimal contract. It is the result of the inability to reconcile both incentives and insurance for the soon-to-be-retired unemployed workers. We show that the unemployment benefit agency could take advantage of the retirement period to tax pensions in order to optimize the trade-off between insurance and incentives at the end of working life.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 1107.

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Length: 25 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:cpm:docweb:1107

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Keywords: Unemployment insurance; Retirement; Recursive contracts; Moral Hazard;

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References

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  1. Robert Shimer & Ivan Werning, 2008. "Liquidity and Insurance for the Unemployed," American Economic Review, American Economic Association, vol. 98(5), pages 1922-42, December.
  2. Hagedorn, Marcus & Kaul, Ashok & Mennel, Tim, 2002. "An adverse selection model of optimal unemployment insurance," ZEI Working Papers B 30-2002, ZEI - Center for European Integration Studies, University of Bonn.
  3. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "Age-Dependent Employment Protection," IZA Discussion Papers 3851, Institute for the Study of Labor (IZA).
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  14. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and The Job Search of Older Workers: The Case For Delaying Retirement Age," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00517107, HAL.
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  24. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1034-1076, 09.
  25. Cahuc, Pierre & Lehmann, Etienne, 2000. "Should unemployment benefits decrease with the unemployment spell?," Journal of Public Economics, Elsevier, vol. 77(1), pages 135-153, July.
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Citations

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Cited by:
  1. Hairault, Jean-Olivier, 2012. "Pour l’emploi des seniors — Assurance chômage et licenciements," Opuscules du CEPREMAP, CEPREMAP, number 28.
  2. J. Ignacio García Pérez & Alfonso R. Sánchez Mártin, 2012. "Fostering job search among older workers: the case for pension reform," Working Papers 12.09, Universidad Pablo de Olavide, Department of Economics.

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