Optimal unemployment insurance in a life cycle model
We extend Hopenhayn and Nicolini's  optimal unemployment contracts by including life-cycle features. We show that it is optimal to implement an age-dependant contract. Indeed, the elderly have only a few years left on the labor market prior to retirement. The short horizon of old workers implies a more digressive replacement ratio. The introduction of a wage tax after re-employment allows to smooth the unemployment benefit profile. Nevertheless, such a tax is less efficient than in Hopenhayn and Nicolini's  paper due to the short horizon of old workers on the labor market. Consequently, we propose to adopt a global approach in our analysis by determining the optimal unemployment insurance and retirement pension. In that case, when an unemployed worker retires, the pension decreases with the length of the last unemployment spell. We then show that the integration of these two social programs (unemployment and retirement) is more efficient in increasing the employment rate and decreasing the cost of insurance programs.
|Date of creation:||2007|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:red:sed007:422. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.