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Aspects of Optimal Unemployment Insurance: Search, Leisure and Capital Market Imperfections

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  • J. S. Flemming

Abstract

The object of this paper is to examine the importance of capital market assumptions. A special continuous-time model is developed in sections II-IV which is applicable to the perfect capital market case. It can also be used when there is no capital market at all (section IV). For 'reasonable' parameter values the optimal replacement rate (ratio of benefits to gross wage) appears to be less than 20% when capital markets are perfect but over 70% when they are non existent (i.e. no saving or dis-saving).

Suggested Citation

  • J. S. Flemming, 1977. "Aspects of Optimal Unemployment Insurance: Search, Leisure and Capital Market Imperfections," NBER Working Papers 0214, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0214
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    References listed on IDEAS

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    1. 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.
    2. Flemming, J. S., 1976. "A reappraisal of the corporation income tax," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 163-169.
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    Cited by:

    1. Edi Karni, 1999. "Optimal Unemployment Insurance: A Survey," Southern Economic Journal, John Wiley & Sons, vol. 66(2), pages 442-465, October.

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