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Optimal Unemployment Insurance in an Estimated Job Search Model with Savings

Author

Listed:
  • Rasmus Lentz

    (University of Wisconsin-Madison)

Abstract

The paper estimates a job search model with savings on Danish microdata that include observations on wealth and wages. Controlling for extensive observed and unobserved worker characteristics heterogeneity, the estimation relates observed unemployment spells to the model implied hazard rate for each worker. The model estimates are sensible and fit the data well. Optimal UI policy is determined in the estimated model as a trade-off between insurance provision and distortion of search incentives. The analysis emphasizes an important policy sensitivity to the interest rate and the importance of including transitional dynamics in the analysis. (Copyright: Elsevier)

Suggested Citation

  • Rasmus Lentz, 2009. "Optimal Unemployment Insurance in an Estimated Job Search Model with Savings," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 37-57, January.
  • Handle: RePEc:red:issued:07-9
    DOI: 10.1016/j.red.2008.01.004
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    References listed on IDEAS

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    1. Anders Frederiksen & Ebbe Krogh Graversen & Nina Smith, 2008. "Overtime work, dual job holding, and taxation," Research in Labor Economics, in: Solomon W. Polachek & Konstantinos Tatsiramos (ed.), Work, Earnings and Other Aspects of the Employment Relation, volume 28, pages 25-55, Emerald Publishing Ltd.
    2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
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    4. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages 283-306, June.
    5. Rasmus Lentz & Torben Tranas, 2005. "Job Search and Savings: Wealth Effects and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 467-490, July.
    6. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
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    More about this item

    Keywords

    Job search; Savings; Optimal Unemployment Insurance; Micro data estimation;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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