Time-consistent unemployment insurance

Kankanamge, Sumudu and Weitzenblum, Thomas (2016) Time-consistent unemployment insurance. TSE Working Paper, n. 16-657

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Official URL: http://tse-fr.eu/pub/30491

Abstract

This paper examines the optimal time-consistent unemployment insurance policy in a search economy with incomplete markets. In a context of repeated choice without a commitment device, we show that the optimal replacement rate depends on how frequently in time the policy can be revised. The exact relation is dependent on the political process: if the utilitarian welfare criterion is used, the optimal rate is higher the shorter the choice periodicity. Self-insurance reduces the need for the public scheme but mostly because the policy cannot be changed often enough. The comparison with an economy where a commitment device is assumed shows that the commitment rate is close to time-consistent rates with very long choice periodicities.

Item Type: Monograph (Working Paper)
Language: English
Date: May 2016
JEL codes: C63 - Computational Techniques; Simulation Modeling
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
J65 - Unemployment Insurance; Severance Pay; Plant Closings
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 01 Jun 2016 12:19
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:30491
URI: http://publications.ut-capitole.fr/id/eprint/22046

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