Optimal Unemployment Insurance in a Model With Skill Loss and Match Quality Uncertainty PDF Download
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Author: Michael John Nipple
Publisher:
ISBN:
Category :
Languages : en
Pages : 98
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Book Description
This dissertation makes a contribution to the question of how best to set the rate of unemployment compensation. Previous research on this topic has emphasized the behavioral response of non-workers to various incentives created by unemployment insurance. Recent work has emphasized two new features. One is the importance of including savings in the model, and the other the recognition that skills tend to rise during employment and fall during unemployment spells. This thesis seeks to combine all three features, search incentives, savings, and skill change effects. The strategy is to develop an unemployment model with these features and to obtain parameters values from a variety of sources, including SIPP data and research by other authors on related questions. The model is then simulated for various ranges of policy choices. The primary policy choice is the benefit replacement ratio, a number that determines the actual level of unemployment compensation. Taxes are set under different assumptions. In some cases, taxes are set to achieve budget balance. In other cases, taxes are set independently of benefit levels. This feature assumes the possibility of a subsidy from other sources, but it allows for a study of the independent incentive effects of benefits and tax rates. Results from the simulations using the most likely parameter specification indicate that a replacement ratio of 58\% is best. A replacement ratio slightly higher than the optimal ratio can lead to a large decrease in average utility, and is problematic. When human capital changes are relatively less responsive to unemployment and employment duration, longer unemployment spells are more desirable as they lead to better matches. When the effect of taxes and benefits are looked at separately, the benefit ratio aspects matters more than the tax rate.
Author: Michael John Nipple
Publisher:
ISBN:
Category :
Languages : en
Pages : 98
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Book Description
This dissertation makes a contribution to the question of how best to set the rate of unemployment compensation. Previous research on this topic has emphasized the behavioral response of non-workers to various incentives created by unemployment insurance. Recent work has emphasized two new features. One is the importance of including savings in the model, and the other the recognition that skills tend to rise during employment and fall during unemployment spells. This thesis seeks to combine all three features, search incentives, savings, and skill change effects. The strategy is to develop an unemployment model with these features and to obtain parameters values from a variety of sources, including SIPP data and research by other authors on related questions. The model is then simulated for various ranges of policy choices. The primary policy choice is the benefit replacement ratio, a number that determines the actual level of unemployment compensation. Taxes are set under different assumptions. In some cases, taxes are set to achieve budget balance. In other cases, taxes are set independently of benefit levels. This feature assumes the possibility of a subsidy from other sources, but it allows for a study of the independent incentive effects of benefits and tax rates. Results from the simulations using the most likely parameter specification indicate that a replacement ratio of 58\% is best. A replacement ratio slightly higher than the optimal ratio can lead to a large decrease in average utility, and is problematic. When human capital changes are relatively less responsive to unemployment and employment duration, longer unemployment spells are more desirable as they lead to better matches. When the effect of taxes and benefits are looked at separately, the benefit ratio aspects matters more than the tax rate.
Author: Andreas Pollak
Publisher: Mohr Siebeck
ISBN: 9783161493041
Category : Business & Economics
Languages : en
Pages : 204
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Book Description
Designing a good unemployment insurance scheme is a delicate matter. In a system with no or little insurance, households may be subject to a high income risk, whereas excessively generous unemployment insurance systems are known to lead to high unemployment rates and are costly both from a fiscal perspective and for society as a whole. Andreas Pollak investigates what an optimal unemployment insurance system would look like, i.e. a system that constitutes the best possible compromise between income security and incentives to work. Using theoretical economic models and complex numerical simulations, he studies the effects of benefit levels and payment durations on unemployment and welfare. As the models allow for considerable heterogeneity of households, including a history-dependent labor productivity, it is possible to analyze how certain policies affect individuals in a specific age, wealth or skill group. The most important aspect of an unemployment insurance system turns out to be the benefits paid to the long-term unemployed. If this parameter is chosen too high, a large number of households may get caught in a long spell of unemployment with little chance of finding work again. Based on the predictions in these models, the so-called "Hartz IV" labor market reform recently adopted in Germany should have highly favorable effects on the unemployment rates and welfare in the long run.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Camille Landais
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 0
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Abstract: This paper analyzes optimal unemployment insurance over the business cycle in a search model in which unemployment stems from matching frictions (in booms) and job rationing (in recessions). Job rationing during recessions introduces two novel effects ignored in previous studies of optimal unemployment insurance. First, job-search efforts have little effect on aggregate unemployment because the number of jobs available is limited, independently of matching frictions. Second, while job-search efforts increase the individual probability of finding a job, they create a negative externality by reducing other jobseekers' probability of finding one of the few available jobs. Both effects are captured by the positive and countercyclical wedge between micro-elasticity and macro-elasticity of unemployment with respect to net rewards from work. We derive a simple optimal unemployment insurance formula expressed in terms of those two elasticities and risk aversion. The formula coincides with the classical Baily-Chetty formula only when unemployment is low, and macro- and micro-elasticity are (almost) equal. The formula implies that the generosity of unemployment insurance should be countercyclical. We illustrate this result by simulating the optimal unemployment insurance over the business cycle in a dynamic stochastic general equilibrium model calibrated with US data
Author: Tan Wang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Building on the tools developed for American call options in financial markets and the optimal timing of investment under uncertainty in economics, this paper proposes a stylized equilibrium model to study the optimal time for a risk-averse unemployed individual, who receives an unemployment insurance benefit and may receive a recall from the old job, to exit from a waiting (and hence unemployment) state and start a new job. It is shown that as a result of the individual's exercising the optimal timing strategy, there is a duration of “waiting” and that this duration is affected by a number of economic factors, prominent among which are uncertainty on the part of the unemployed individual and the attitude of this individual toward risk.
Author: Ammar Farooq
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We present new evidence on the impact of more generous unemployment insurance (UI) on workers' ability to find jobs better suited to their skills. Using Longitudinal Employer-Household Dynamics data, we find the UI extensions introduced in the U.S. improved the quality of worker-job matches. Using Current Population Survey data, we also find that longer UI benefit durations decrease the mismatch between workers' educational attainments and the educational requirements of jobs. We find bigger effects of UI on match quality for those more likely to be liquidity constrained--women, non-whites and less-educated workers--,suggesting UI extensions improve the functioning of the labor market.
Author: Marcus Hagedorn
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Author: Paola Potestio
Publisher:
ISBN: 9783030913205
Category :
Languages : en
Pages : 0
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Book Description
This book examines unemployment insurance policy through a survey, taking stock of the theoretical work in the field of labor economics. It closely follows and assesses developments in the modelling of optimal unemployment insurance (UI) policies, beginning with the initial analytical findings produced in the second half of the 1970s. A main part of the survey is devoted to the two basic strands of analysis about, respectively, the optimal level of UI benefits and the optimal time profile of UI policy. The book has two different objectives. The first is to provide an essential summary of the individual models, with the intention of underscoring how a number of specific messages for the policy-maker can be derived from analytical constructions. It further emphasizes and comments on what the models deliver to UI policy-makers. The second objective is to stress the importance and extension of open questions in the field of the theoretical approach to the unemployment insurance issue. The survey discusses the multiplicity of heterogeneities of the labor world in particular as relevant for UI issues on the one side, and on the other hand, the independence of the two basic choices of UI policy, its meaning and its limits, and the possible forms of complementarity between these choices. The book is a must-read for researchers, students, and policy-makers interested in a better understanding of the field of labor economics in general, as well as unemployment insurance policies in particular.
Author: Tim Mennel
Publisher:
ISBN: 9783898258715
Category :
Languages : en
Pages : 119
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Book Description
Author: Orley Ashenfelter
Publisher: Elsevier
ISBN: 0444534520
Category : Business & Economics
Languages : en
Pages : 1141
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Book Description
A guide to the continually evolving field of labour economics.
