IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Should UI Benefits Really Fall Over Time?

Author Info

Listed author(s):
  • Hassler, John

    ()

    (Stockholm University)

  • Rodriguez Mora, José V.

    ()

    (University of Edinburgh)

Abstract

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in a tractable model allowing moral hazard, adverse selection and hidden saving. Analytical results show that when the search productivity of unemployed is constant over the unemployment spell, benefits should typically increase or be constant. The only exception is when there is moral hazard and no hidden saving. In general, adverse selection problems tend to generate increasing benefits, moral hazard problems constant benefits and decreasing search productivity falling benefits.

Download Info

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/dp622.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 622.

as
in new window

Length: 29 pages
Date of creation: Nov 2002
Handle: RePEc:iza:izadps:dp622
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:


Keywords: moral hazard; unemployment insurance; adverse selection;

Other versions of this item:

Find related papers by JEL classification:
  • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
  • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
  • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

This paper has been announced in the following NEP Reports:

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. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005. "A Positive Theory Of Geographic Mobility And Social Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, 02.
  2. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-399, April.
  3. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-1362, December.
  4. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  5. McCormick, Barry, 1997. "Regional unemployment and labour mobility in the UK," European Economic Review, Elsevier, vol. 41(3-5), pages 581-589, April.
  6. Abraham, Arpad & Pavoni, Nicola, 2004. "Efficient Allocations with Moral Hazard and Hidden Borrowing and Lending," Working Papers 04-05, Duke University, Department of Economics.
  7. DaVanzo, Julie, 1978. "Does Unemployment Affect Migration?-Evidence from Micro Data," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 504-514, November.
  8. Pavoni, Nicola, 2007. "On optimal unemployment compensation," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1612-1630, September.
  9. Engen, Eric M. & Gruber, Jonathan, 2001. "Unemployment insurance and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 545-579, June.
  10. Heer, Burkhard, 2003. "Employment and Welfare Effects of a Two-Tier Unemployment Compensation System," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 147-168, March.
  11. 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.
  12. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-438, April.
  13. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-755, September.
  14. Hassler, John & Rodriguez Mora, Jose V., 1999. "Employment turnover and the public allocation of unemployment insurance," Journal of Public Economics, Elsevier, vol. 73(1), pages 55-83, July.
  15. Atila Abdulkadiroglu & Burhanettin Kuruscu & Aysegul Sahin, 2002. "Unemployment Insurance and the Role of Self-Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 681-703, July.
  16. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-572, July.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:

  1. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(5), pages 565-585, September.
  2. Andreas Pollak, 2008. "Optimal Unemployment Insurance with Variable Skill Levels," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 696-726, December.
  3. Christian Holzner & Volker Meier & Martin Werding, 2010. "Time Limits in a Two-tier Unemployment Benefit Scheme under Involuntary Unemployment," CESifo Economic Studies, CESifo, vol. 56(2), pages 251-277, June.
  4. Schwartz, J., 2015. "Optimal unemployment insurance: When search takes effort and money," Labour Economics, Elsevier, vol. 36(C), pages 1-17.
  5. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
  6. 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.
  7. Hassler, John & Rodríguez Mora, José Vicente, 2007. "Unemployment insurance design: inducing moving and retraining," Discussion Paper Series In Economics And Econometrics 0702, Economics Division, School of Social Sciences, University of Southampton.
  8. Hassler, John & Rodríguez Mora, José V., 2008. "Unemployment insurance design: Inducing moving and retraining," European Economic Review, Elsevier, vol. 52(5), pages 757-791, July.
  9. Christian Holzner & Volker Meier & Martin Werding, 2004. "Time Limits on Welfare Use under Involuntary Unemployment," CESifo Working Paper Series 1220, CESifo Group Munich.

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

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp622. 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.