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Optimal Unemployment Insurance: A Survey

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  • Edi Karni

Abstract

Unemployment insurance improves the allocation of risk bearing at the cost of reduced incentives for work. In the past two decades, a branch of the literature has emerged that deals with the optimal design of unemployment insurance. This literature has been influenced by ideas and methods from information economics and by theories from labor economics. The result is a collection of models designed to highlight a variety of issues pertaining to the provision of optimal unemployment insurance. This paper reviews these issues, summarizes the relevant literature, assesses its accomplishments, and points out problems that require further study.

Suggested Citation

  • Edi Karni, 1999. "Optimal Unemployment Insurance: A Survey," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 442-465, October.
  • Handle: RePEc:sej:ancoec:v:66:2:y:1999:p:442-465
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    Citations

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    Cited by:

    1. Brown, Alessio J.G. & Orszag, J. Michael & Snower, Dennis J., 2008. "Unemployment accounts and employment incentives," European Journal of Political Economy, Elsevier, vol. 24(3), pages 587-604, September.
    2. Pisauro, Giuseppe, 2002. "The beneficial effects of generous unemployment benefits on profits and employment," European Journal of Political Economy, Elsevier, vol. 18(4), pages 739-760, November.
    3. Raj Chetty, 2005. "Why do Unemployment Benefits Raise Unemployment Durations? Moral Hazard vs. Liquidity," NBER Working Papers 11760, National Bureau of Economic Research, Inc.
    4. Jeremy Schwartz, 2012. "Unemployment Insurance and the Business Cycle: What Adjustments are Needed?," EcoMod2012 3674, EcoMod.
    5. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    6. Donald O. Parsons, 2013. "Understanding severance pay," Cuadernos de Economía - Spanish Journal of Economics and Finance, ELSEVIER, vol. 36(102), pages 155-165, Diciembre.
    7. Hagedorn, Marcus & Kaul, Ashok & Mennel, Tim, 2010. "An adverse selection model of optimal unemployment insurance," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 490-502, March.
    8. Parsons, Donald O., 2016. "Moral-Hazard-Free First-Best Unemployment Insurance," IZA Discussion Papers 9824, Institute for the Study of Labor (IZA).
    9. Walter Nicholson & Karen Needels, 2006. "Unemployment Insurance: Strengthening the Relationship between Theory and Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 47-70, Summer.
    10. Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2009. "The macroeconomic role of unemployment compensation," LSE Research Online Documents on Economics 28517, London School of Economics and Political Science, LSE Library.
    11. Tomer Blumkin & Leif Danziger & Eran Yashiv, 2017. "Optimal unemployment benefit policy and the firm productivity distribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 36-59, February.
    12. Parsons, Donald O., 2011. "Double-Sided Moral Hazard in Job Displacement Insurance Contracts," IZA Discussion Papers 6003, Institute for the Study of Labor (IZA).
    13. Parsons, Donald O., 2014. "Job Displacement Insurance: An Overview," IZA Discussion Papers 8223, Institute for the Study of Labor (IZA).
    14. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 43-61.
    15. Claus T. Hansen & Torben Tranaes, 2000. "Optimal Workfare in a Society of Workers and Non-Workers," Econometric Society World Congress 2000 Contributed Papers 0758, Econometric Society.
    16. Blumkin, Tomer & Hadar, Yossi & Yashiv, Eran, 2003. "Efficient Unemployment Insurance Time Path," CEPR Discussion Papers 3810, C.E.P.R. Discussion Papers.
    17. Pavoni, Nicola, 2007. "On optimal unemployment compensation," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1612-1630, September.
    18. Kolsrud, Jonas, 2013. "Precaution and Risk Aversion: Decomposing the Effect of Unemployment Benefits on Saving," Working Paper Series 2013:14, Uppsala University, Department of Economics.
    19. Parsons, Donald O., 2016. "The Simple Analytics of Job Displacement Insurance," IZA Discussion Papers 9823, Institute for the Study of Labor (IZA).
    20. Eric Levin & Robert Wright, 2001. "Unemployment insurance, moral hazard, and economic growth," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(4), pages 373-384, November.
    21. Ping Yan, 2011. "Optimal Unemployment Insurance with Endogenous Search Effort," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 347-369, November.
    22. Stephen Woodbury, 2013. "Unemployment Insurance," Upjohn Working Papers and Journal Articles 14-208, W.E. Upjohn Institute for Employment Research.
    23. repec:kap:iaecre:v:7:y:2001:i:4:p:373-384 is not listed on IDEAS
    24. Walter Nicholson & Karen Needels, "undated". "Optimal Extended Unemployment Benefits," Mathematica Policy Research Reports 3362c47819f246f7a3b20dd00, Mathematica Policy Research.

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