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Optimal Unemployment Insurance for Older Workers

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  • Jean-Olivier Hairault
  • François Langot
  • Sébastien Menard
  • Thepthida Sopraseuth

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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File URL: http://tepp.eu/RePEc/files/teppwp/TEPP-WP-12-07-JOH-FL-SM-TS.pdf
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Bibliographic Info

Paper provided by TEPP in its series TEPP Working Paper with number 2012-07.

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Date of creation: 2012
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Handle: RePEc:tep:teppwp:wp12-07

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Postal: Université Paris-Est Marne La Vallée, 5 bd Descartes, 77454 Champs sur Marne
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References

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  1. 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.
  2. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
  3. 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.
  4. Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
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  6. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
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  8. Phelan, Christopher & Townsend, Robert M, 1991. "Computing Multi-period, Information-Constrained Optima," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 853-81, October.
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  11. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-62, December.
  12. Joseph Stiglitz & Jungyoll Yun, 2002. "Integration of unemployment insurance with retirement insurance," Discussion Papers 0203-04, Columbia University, Department of Economics.
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  18. Robert Shimer & Iván Werning, 2005. "Liquidity and insurance for the unemployed," Staff Report 366, Federal Reserve Bank of Minneapolis.
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  23. repec:hal:cesptp:hal-00517107 is not listed on IDEAS
  24. 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.
  25. Spear, Stephen E & Srivastava, Sanjay, 1987. "On Repeated Moral Hazard with Discounting," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 599-617, October.
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Cited by:
  1. Parsons, Donald O., 2014. "Job Displacement Insurance: An Overview," IZA Discussion Papers 8223, Institute for the Study of Labor (IZA).
  2. Hairault, Jean-Olivier, 2012. "Pour l’emploi des seniors — Assurance chômage et licenciements," Opuscules du CEPREMAP, CEPREMAP, number 28, May.
  3. 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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