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Title: Optimal Unemployment Policy

Citation Type: Working Paper

Publication Year: 2018

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Abstract: A vast literature studies the optimal design and generosity of unemployment insurance (UI). However, UI is just one of the variety of programs used in developed countries around the world to face the problem of unemployment, though unemployment programs other than UI have been subjected to much less welfare analysis. My paper adds to a small but growing literature by evaluating the welfare implications of a wider range of unemployment programs using an estimated search model that incorporates two empirically-relevant phenomena generally ignored in such studies: private consumption smoothing and fiscal externalities from income taxes. I show that monitoring and job search assistance (JSA) play important roles, with welfare impacts at least as large as that of the UI replacement rate. The optimal combined policy incorporates more short-term insurance as well as increased monitoring of search and expanded provision of JSA. I also find that general and partial equilibrium results are fairly similar, as programs that raise bargained wages also reduce job-creation, with impacts on welfare that nearly offset.

Url: http://regconf.hse.ru/uploads/4bdf51ad85d637c8468290770fc39cc8eeb901a8.pdf

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Authors: Lawson, Nicholas

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Publication Number: 2018-02

Institution: University of Quebec at Montreal

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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