IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Optimal Unemployment Insurance with Monitoring and Sanctions

  • Boone, Jan

    ()

    (Tilburg University)

  • Fredriksson, Peter

    ()

    (Stockholm University)

  • Holmlund, Bertil

    ()

    (Uppsala University)

  • van Ours, Jan C.

    ()

    (Tilburg University)

This paper analyzes the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable. We examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is deemed insufficient. We find that introducing monitoring and sanctions represents a welfare improvement for reasonable estimates of monitoring costs; this conclusion holds both relative to a system featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt. The optimal sanction rates implied by our calibrated model are much higher than the sanction rates typically observed in European labor markets.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp401.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 401.

as
in new window

Length: 33 pages
Date of creation: Nov 2001
Date of revision:
Publication status: published in: Economic Journal, 2007, 117 (518), 399-421
Handle: RePEc:iza:izadps:dp401
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. van den Berg, G. & van der Klaauw, B. & van Ours, J.C., 1998. "Punitive sanctions and the transition from welfare to work," Discussion Paper 1998-56, Tilburg University, Center for Economic Research.
  2. Skans, Oskar Nordstrom, 2005. "Age effects in Swedish local labor markets," Economics Letters, Elsevier, vol. 86(3), pages 419-426, March.
  3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  4. Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
  5. Maarten Lindeboom & France Portrait & Gerard J. van den Berg, 2002. "An econometric analysis of the mental-health effects of major events in the life of older individuals," Health Economics, John Wiley & Sons, Ltd., vol. 11(6), pages 505-520.
  6. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  7. Boone, Jan & Bovenberg, Lans, 2002. "Optimal labour taxation and search," Journal of Public Economics, Elsevier, vol. 85(1), pages 53-97, July.
  8. Jaap H. Abbring & Gerard J. Berg & Jan C. Ours, 2005. "The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment," Economic Journal, Royal Economic Society, vol. 115(505), pages 602-630, 07.
  9. Kolm, Ann-Sofie, 1998. "Labour Taxation in a Unionised Economy with Home Production," Working Paper Series 1998:7, Uppsala University, Department of Economics.
  10. Corrado Benassi & Antonello E. Scorcu, 2003. "Indexation Rules, Risk Aversion and Imperfect Information," Manchester School, University of Manchester, vol. 71(3), pages 330-340, 06.
  11. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  12. Bertil Holmlund & Ann-Sofie Kolm, 2000. "International Spillover Effects of Sectoral Tax Differentiation in Unionized Economies," CESifo Working Paper Series 295, CESifo Group Munich.
  13. Bertil Holmlund, 2002. "Labor Taxation in Search Equilibrium with Home Production," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 415-430, November.
  14. Kleven, Henrik Jacobsen & Richter, Wolfram F & Sorensen, Peter Birch, 2000. "Optimal Taxation with Household Production," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 584-94, July.
  15. Berg, Gerard J. van den & Klaauw, Bas van der & Ours, Jan C. van, 1998. "Punitive sanctions and the transition rate from welfare to work," Serie Research Memoranda 0033, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  16. 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.
  17. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  18. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," Seminar Papers 700, Stockholm University, Institute for International Economic Studies.
  19. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January.
  20. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  21. Johansson, Kerstin, 2002. "Labor market programs, the discouraged-worker effect, and labor force participation," Working Paper Series 2002:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  22. Johansson, Kerstin, 2002. "Labor Market Programs, the Discouraged-Worker Effect, and Labor Force Participation," Working Paper Series 2002:16, Uppsala University, Department of Economics.
  23. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  24. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-95, September.
  25. Terry R. Johnson & Daniel H. Klepinger, 1994. "Experimental Evidence on Unemployment Insurance Work-Search Policies," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 665-717.
  26. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
  27. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, vol. 10(3), pages 403-425, December.
  28. Phelps, Edmund S & Zoega, Gylfi, 1998. "Natural-Rate Theory and OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 782-801, May.
  29. P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 221-264, October.
  30. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
  31. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  32. Dan A. Black & Jeffrey A. Smith & Mark C. Berger & Brett J. Noel, 1999. "Is the Threat of Training More Effective Than Training Itself? Experimental Evidence from the UI System," UWO Department of Economics Working Papers 9913, University of Western Ontario, Department of Economics.
  33. repec:dgr:uvatin:2098076 is not listed on IDEAS
  34. Niels Fredriksen & Peter Hansen & Henrik Jacobsen & Peter Sørensen, 1995. "Subsidising consumer services: effects on employment, welfare and the informal economy," Fiscal Studies, Institute for Fiscal Studies, vol. 16(2), pages 71-93, May.
  35. Mortensen, Dale T & Pissarides, Christopher, 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers 2989, C.E.P.R. Discussion Papers.
  36. Fredriksson, P. & Holmlund, B., 1998. "Optimal Unemployment Insurance in Search Equilibrium," Papers 1998-2, Uppsala - Working Paper Series.
  37. Jan Boone & Jan C. van Ours, 2000. "Modeling Financial Incentives to Get Unemployed Back to Work," Econometric Society World Congress 2000 Contributed Papers 0973, Econometric Society.
  38. Skedinger, Per, 2006. "Minimum wages and employment in Swedish hotels and restaurants," Labour Economics, Elsevier, vol. 13(2), pages 259-290, April.
  39. Hian Hoon, 1996. "Payroll taxes and VAT in a labor-turnover model of the ‘natural rate’," International Tax and Public Finance, Springer, vol. 3(3), pages 369-383, July.
  40. Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November.
  41. Broersma, Lourens & Van Ours, Jan C., 1999. "Job searchers, job matches and the elasticity of matching," Labour Economics, Elsevier, vol. 6(1), pages 77-93, March.
  42. Eriksson, Stefan, 2002. "Imperfect information, wage formation, and the employability of the unemployed," Working Paper Series 2002:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  43. Per Johansson & Mårten Palme, 2002. "Assessing the Effect of Public Policy on Worker Absenteeism," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 381-409.
  44. repec:rus:hseeco:10108 is not listed on IDEAS
  45. van Ours, J.C. & Broersma, L., 1999. "Job searchers, job matches and the elasticity of matching," Other publications TiSEM c199f354-b73c-49b6-84f6-e, Tilburg University, School of Economics and Management.
  46. Abbring, Jaap H. & van den Berg, Gerard J., 2002. "Dynamically assigned treatments: duration models, binary treatment models, and panel data models," Working Paper Series 2002:20, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  47. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 593-610, September.
  48. repec:dgr:uvatin:1998076 is not listed on IDEAS
  49. Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
  50. Broström, Göran & Palme, Mårten & Johansson, Per, 2002. "Economic incentives and gender differences in work absence behavior," Working Paper Series 2002:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  51. Gerard J. van den Berg & Bas van der Klaauw & Jan C. van Ours, 1998. "Punitive Sanctions and the Transition Rate from Welfare to Work," Tinbergen Institute Discussion Papers 98-076/3, Tinbergen Institute.
  52. Sorensen, Peter Birch, 1999. "Optimal tax progressivity in imperfect labour markets," Labour Economics, Elsevier, vol. 6(3), pages 435-452, September.
  53. Hoon, Hian Teck & Phelps, Edmund S., 1997. "Growth, wealth and the natural rate: Is Europe's jobs crisis a growth crisis?," European Economic Review, Elsevier, vol. 41(3-5), pages 549-557, April.
  54. Sacklén, Hans, 2002. "An evaluation of the Swedish trainee replacement schemes," Working Paper Series 2002:7, IFAU - Institute for Evaluation of Labour Market and Education Policy.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp401. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.