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Optimal Unemployment Insurance with Monitoring and Sanctions

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Author Info
Boone, Jan (Department of Economics and CentER for Economic Research, Tilburg University, OSA and CEPR)
Fredriksson, Peter (Department of Economics, Uppsala University, IFAU and CESifo)
Holmlund, Bertil (Department of Economics, Uppsala University and CESifo)
van Ours, Jan C. () (CentER for Economic Research, Tilburg University, OSA, CEPR and IZA, Bonn)

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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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 401.

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Length: 32 pages
Date of creation: Nov 2001
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Handle: RePEc:iza:izadps:dp401

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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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Boone, J. & Ours, J.C. van, 2000. "Modeling financial incentives to get unemployed back to work," Discussion Paper 2, Tilburg University, Center for Economic Research. [Downloadable!]
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  4. Phelps, Edmund S & Zoega, Gylfi, 1998. "Natural-Rate Theory and OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 782-801, May. [Downloadable!] (restricted)
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  9. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 100(3), pages 593-610, September. [Downloadable!] (restricted)
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  11. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does active labour market policy work? Lessons from the Swedish experiences," Working Paper Series 2002:4, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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  12. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December. [Downloadable!] (restricted)
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  14. Hoon, Hian Teck & Phelps, Edmund S., 1997. "Growth, wealth and the natural rate: Is Europe's jobs crisis a growth crisis?," European Economic Review, Elsevier, vol. 41(3-5), pages 549-557, April. [Downloadable!] (restricted)
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    Other versions:
  16. Kolm, Ann-Sofie, 2000. " Labour Taxation in a Unionised Economy with Home Production," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(4), pages 689-705, December. [Downloadable!] (restricted)
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  25. Sacklén, Hans, 2002. "An evaluation of the Swedish trainee replacement schemes," Working Paper Series 2002:7, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  26. Johansson, Kerstin, 2002. "Labor Market Programs, the Discouraged-Worker Effect, and Labor Force Participation," Working Paper Series 2002:16, Uppsala University, Department of Economics. [Downloadable!]
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  28. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January. [Downloadable!] (restricted)
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  30. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Blackwell Publishing, vol. 11(3), pages 267-95, September. [Downloadable!] (restricted)
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  32. repec:rus:hseeco:10108 is not listed on IDEAS
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  34. 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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  37. Bertil Holmlund, 2001. "Labor Taxation in Search Equilibrium with Home Production," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  38. 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:
  39. P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR, CES, MSH, vol. 12(25), pages 221-264, October. [Downloadable!] (restricted)
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