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Optimal Unemployment Insurance in Search Equilibrium

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  • Fredriksson, P.
  • Holmlund, B.

Abstract

Should unemployment compensation be paid indefinitely at a fixed rate or should it decline (or increase) over a worker's unemployment spell? We examine these issues using an equilibrium model of search unemployment. The model features worker-firm bargaining over wages, free entry of new jobs, and endogenous serach effort among the unemployed. The main result is that an optimal insurance program implies a declining sequence of unemployment compensation over the spell of unemployment.

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Bibliographic Info

Paper provided by Uppsala - Working Paper Series in its series Papers with number 1998-2.

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Length: 33 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:uppaal:1998-2

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Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: UNEMPLOYMENT ; UNEMPLOYMENT INSURANCE ; JOB SEARCH;

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References

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