Optimal unemployment insurance in an equilibrium business-cycle model

A-Tier
Journal: Journal of Monetary Economics
Year: 2015
Volume: 71
Issue: C
Pages: 99-118

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

The optimal cyclical behavior of unemployment insurance is characterized in an equilibrium search model with risk-averse workers. Contrary to the current US policy, the path of optimal unemployment benefits is pro-cyclical – positively correlated with productivity and employment. Furthermore, optimal unemployment benefits react non-monotonically to a productivity shock: in response to a fall in productivity, they rise on impact but then fall significantly below their pre-recession level during the recovery. As compared to the current US unemployment insurance policy, the optimal state-contingent unemployment benefits smooth cyclical fluctuations in unemployment and deliver substantial welfare gains.

Technical Details

RePEc Handle
repec:eee:moneco:v:71:y:2015:i:c:p:99-118
Journal Field
Macro
Author Count
2
Added to Database
2026-01-26