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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 C

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Abstract

This Paper analyses 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 labour markets

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3082.

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Date of creation: Nov 2001
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Handle: RePEc:cpr:ceprdp:3082

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Related research
Keywords: sanctions; search; unemployment insurance;

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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  9. 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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    Other versions:
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  37. repec:rus:hseeco:10108 is not listed on IDEAS
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  41. 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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