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Optimal unemployment insurance with multiple applications

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  • Wee, Shu Lin

Abstract

This paper examines how unemployment transfers should be allocated over the business cycle. When risk-averse workers can submit multiple applications, the optimal UI policy is countercyclical. In contrast, optimal policy in a standard search model featuring one-to-one matching is procyclical. In the latter, more generous UI during a downturn discourages search effort, dampening job creation. In the former, decreased search effort aids job creation. Because firms cannot coordinate and commit to not making the same worker an offer, lower search effort by reducing the number of applications sent mitigates this coordination friction. This in turn boosts job creation incentives, supporting employment outcomes.

Suggested Citation

  • Wee, Shu Lin, 2025. "Optimal unemployment insurance with multiple applications," Journal of Monetary Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:moneco:v:154:y:2025:i:c:s0304393225000698
    DOI: 10.1016/j.jmoneco.2025.103798
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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