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Optimal Unemployment Insurance in an Estimated Job Search Model with Savings

Author

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  • 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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    More about this item

    Keywords

    Job search; Savings; Optimal Unemployment Insurance; Micro data estimation;

    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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