How Should Unemployment Benefits Respond to the Business Cycle?
Unemployment insurance programs balance the benefits of consumption smoothing for unemployed workers against the disincentive effects of unemployment benefits. Such a balancing of benefits and costs is likely sensitive to the cyclical state of the economy, and hence the generosity of benefits should also respond to the cyclical state of the economy. The nature of such responses in an optimal unemployment insurance (UI) program is analyzed in a simple model. The results suggest that an optimal UI program would increase the initial level of benefits and probably extend higher benefits over time in response to a recessionary shock. A simple extension of benefits, such as exists automatically in the system in the United States, provides both poorer insurance and poorer incentives than the optimal program, and does so at a higher cost. Moreover, the current UI system in the U.S. provides a substantially higher level of welfare to workers who lose jobs during tight labor markets.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||01 Jul 2002|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.cepremap.cnrs.fr/sce2002.html/|
More information through EDIRC
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.:
- Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997.
"Optimal Unemployment Insurance,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 412-38, April.
- Lars Ljungqvist & Thomas Sargent, 1999. "Matlab code for Hopenhayn-Nicolini's optimal unemployment insurance model," QM&RBC Codes 18, Quantitative Macroeconomics & Real Business Cycles.
- Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
- Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
- Atila Abdulkadiroglu & Burhanettin Kuruscu & Aysegul Sahin, 2002.
"Unemployment insurance and the role of self-insurance,"
0102-27, Columbia University, Department of Economics.
- 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.
- Phelan, C. & Townsend, R.M., 1990.
"Computing Multiperiod, Information-Constrained Optima,"
University of Chicago - Economics Research Center
90-13, Chicago - Economics Research Center.
- Phelan, Christopher & Townsend, Robert M, 1991. "Computing Multi-period, Information-Constrained Optima," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 853-81, October.
- Christopher Phelan & Robert M Townsend, 2010. "Computing Multi-Period, Information Constrained Optima," Levine's Working Paper Archive 117, David K. Levine.
- Card, David & Levine, Phillip B., 2000.
"Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program,"
Journal of Public Economics,
Elsevier, vol. 78(1-2), pages 107-138, October.
- David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
- Acemoglu, D. & Shimer, R., 1997.
"Efficient Unemployment Insurance,"
97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
- Martin Feldstein & James M. Poterba, 1984.
"Unemployment Insurance and Reservation Wages,"
NBER Working Papers
1011, National Bureau of Economic Research, Inc.
- 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 1347-62, December.
- 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.
- Meyer, Bruce D, 1990.
"Unemployment Insurance and Unemployment Spells,"
Econometric Society, vol. 58(4), pages 757-82, July.
- Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
- Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
When requesting a correction, please mention this item's handle: RePEc:sce:scecf2:167. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.