benefits conditional on work and the nordic model abstract welfare benefits in the nordic countries are often tied to employment we argue that this is one of the factors behind the success of the nordic model where a comprehensive welfare state is associated with high employment in a general equilibrium setting the underlining mechanism works through wage moderation and job creation the benefits make it more important to hold a job thus lower wages will be accepted and more jobs created moreover we show that the incentive to acquire higher education improves further boosting employment in the long run these positive effects help in counteracting the negative impact of taxation through numerical simulations we show how this mechanism can contribute to explain the better labor market performance and more equitable income distribution of nordic countries compared to continental european ones

unemployment insurance design how to induce moving and retraining evidence suggests that unemployed individuals sometimes can a ect their job prospects by undertaking a costly action like deciding to move or retrain realistically such an opportunity arises only for some individuals and the identity of those is unobservable unemployment insurance should then be designed to induce individuals to exploit existing opportunities to move or retrain without excessively diminishing the insurance value for the remaining unemployed this problem has been neglected in previous literature on unemployment insurance design and we show that it may have important consequences in particular we derive closed form solutions showing that unemployment bene ts should increase over the unemployment spell having an initial period with low bene ts and a substantial increase after this period has expired jel classi cation j65 j64 e24

rent control and prices of owner occupied housing we examine the relation between rent control and prices of owner occupied housing in th e presence of different qualities of housing while a rent ceiling and the price of condominiums are substitutes if housing is undifferentiated it is shown that this is not necessarily the case when housing differs in quality a complete dismantling of rent control may in fact increase the price of condominiums

optimal social insurance with endogenous health this thesis consists of four independent papers covering macroeconomic topics such as unemployment insurance retirement business cycles and disability insurance the unifying theme connecting all papers is the importance of health when addressing these issues the first paper derives the optimal insurance against unemployment and disability in a setting where individuals can determine the probability of becoming disabled by exerting prevention effort the second paper develops a life cycle model of labor supply and retirement to study the interactions between health and the labor supply behavior of older workers in particular disability insurance and retirement the third paper looks at the role of health in a business cycle framework here health is treated as an asset that generates time and utility the last paper derives a theoretical model of the application decision for disability benefits and proposes an empirical strategy for measuring screening stringency in the disability insurance program

optimal unemployment insurance for older workers this paper studies the optimal unemployment insurance for older workers in a repeated principal agent model where the search intensity of risk averse workers the agents is not observed by the risk neutral insurance agency the principal when unemployment benefits are the only available tool the insurance agency is not able to induce older workers to search for a job this is because of the short time horizon of workers close to retirement we propose to introduce a pension tax dependent on the length of the unemployment spell we show that this device performs better than a wage tax after re employment first it makes jobs more attractive as they are free of tax second because re employment will be short lived a pension tax is a more powerful incentive than a wage tax and provides more substantial fiscal gains to the agency finally a pension tax allows those workers near retirement who still do not exercise job search to smooth their consumption during their unemployment spell as if they could borrow against their future pension

optimal welfare to work programs a welfare to work wtw program is a mix of government expenditures on various labour market policies targeted to the unemployed e g unemployment insurance m job search monitoring m social assistance sa wage subsidies this paper provides a dynamic principal agent framework suitable for analysing chief features of an optimal wtw program such as the sequence and duration of the different policies the dynamic pattern of payments along the unemployment spell and the emergence of taxes subsidies upon re employment the optimal program endogenously generates an absorbing policy of last resort social assistance characterized by a constant lifetime payment and no active participation by the agent human capital depreciation is a necessary condition for policy transitions to be part of an optimal wtw program the typical sequence of policies is quite simple the program starts with standard ui then switches into monitored search and finally into sa the optimal benefits are decreasing during unemployment insurance and constant during both jm and sa whereas taxes subsidies can be either increasing or decreasing with duration during ui they must decrease increase during a phase of jm in a calibration exercise we use our model to analyse quantitatively the features of the optimal program for the u s economy with respect to the existing u s system the optimal wtw scheme delivers sizeable welfare gains to unskilled workers because the incentives to search for a job can be retained even while delivering more insurance and using costly monitoring less intensively

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

optimal unemployment insurance in a matching equilibrium this article considers optimal unemployment insurance ui in an equilibrium matching framework where wages are determined by strategic bargaining it compares the outcome with the standard nash bargaining approach which can be interpreted as union wage bargaining with an insider outsider distortion it also shows that a coordinated policy approach one that chooses job creation subsidies and ui optimally generates a much greater welfare gain than a policy that simply varies ui payments by duration

optimal use of labor market policies the role of job search assistance abstract this paper demonstrates how economic theory can be combined with state of the art empirics to make quantitative statements about optimal policy using a large administrative data set for west germany as well as nonparametric and semiparametric estimation techniques i parameterize the model proposed by pavoni and violante 2005 2007 for the optimal choice of different financial and activation measures for unemployed workers the parameterized model is used to study the role of job search assistance in optimal welfare to work programs and assess the optimality of the west german policy in the period 2000 to 2002

unemployment insurance and unemployment accounts the best of both worlds unemployment accounts are mandatory individual savings accounts that can be used only during unemployment or retirement unlike unemployment insurance unemployment accounts solve the moral hazard problem but provide no public insurance to workers i study a hybrid system that borrows from concepts of both unemployment insurance and unemployment accounts in which workers are mandated to save when employed and can withdraw from the account when unemployed once the account is exhausted the unemployed worker receives unemployment benefits this hybrid policy provides insurance to workers more efficiently than an unemployment insurance system because it provides government benefits selectively as a consequence young workers can reduce their precautionary savings and better smooth their consumption over the life cycle calibrating the model to the us economy i find that relative to an optimal unemployment insurance system the optimal hybrid policy leads to a welfare gain of 2 4 measured as consumption equivalent variation jel classification e24 e61 j64 j65

optimal unemployment insurance in an equilibrium business cycle model 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

labor market policy evaluation with ace abstract i develop an agent based computational economics ace model with which i evaluate the aggregate impact of labor market policies the findings are that government financed training measures increase the outflow rate from unemployment to employment although the overall effect is positive this effect is achieved by reducing the outflow rate for those who do not receive subsidies furthermore the outflow rate would have been downward biased had one supposed a matching function that is exogenous to policies

preference revelation and monopsony abstract 1 johnson demonstrated the formal equivalence between the free rider problem and monopsony 2 vickrey s method for eliminating the inefficiencies resulting from monopsony monopoly works by converting simple monopsonists monopolists into perfectly discriminating monopsonists monopolists 3 we show that three recently proposed solutions to the free rider problem have the same rationale i e they use clarke taxes to convert johnson s simple monopsonists into perfectly discriminating monopsonists the three mechanisms are those of i clarke and groves ii groves and ledyard and iii arrow the relationships between these mechanisms and between each of them and monopsony are analyzed diagrammatically

viewpoint innovations in the theory and practice of redistribution policy we present a survey of key results from second best optimal redistribution theory and their implications for tax transfer policy the core results include the corlett hague theorem the deaton conditions the production efficiency theorem the atkinson stiglitz theorem and the mirrlees saez characterization of the optimal non linear income tax system these have been augmented in recent years by optimal participation tax rates the implications of involuntary unemployment the use of unconventional instruments such as minimum wages in kind transfer and workfare and the optimal taxation of capital income and bequests l auteur presente un survol des principaux resultats theoriques de la redistribution optimale de second ordre et de leurs implications pour les politiques d imposition et de transferts les resultats fondamentaux incluent le theoreme de corlett hague les conditions de deaton les theoremes d efficacite en production le theoreme d atkinson stiglitz ainsi que la caracterisation du systeme optimal d imposition non lineaire du revenu a la mirrlees saez ces derniers resultats ont ete enrichis au cours des dernieres annees par certains autres portant sur les taux d imposition decoulant des allocations conditionnelles les implications du chomage involontaire l usage d instruments non conventionnels tels que le salaire minimum les transferts en nature le workfare ainsi que l imposition optimale des revenus du capital et des legs ces resultats sont exposes et leurs implications pour les politiques d imposition et de transferts sont discutees

search effort and unemployment insurance reconsidered in this paper the impact that receipt of unemployment benefit has on job search effort is investigated utilizing data drawn from the 1984 labour force survey reduced form search effort equations are estimated conditional on the decision to seek work

unemployment insurance strengthening the relationship between theory and policy ever since the u s federal state system of unemployment insurance was founded in the 1930s it has provided partial temporary replacement of wages to eligible workers who lose jobs through no fault of their own as determined by state level regulations unemployment insurance is one of the largest social insurance programs in the united states with benefits paid totaling about 34 billion in 2004 this figure is considerably smaller than for social security medicare or medicaid but it exceeds spending on such major programs as workers compensation temporary assistance to needy families tanf or food stamps in this paper we focus on the ways economic theory can help us understand the challenges that this complex program is likely to face over the next few years we begin by summarizing the salient characteristics of the unemployment insurance program and then examine the theoretical and econometric research much of this research revolves around the main goals of the program which include 1 sustaining consumption for workers and their families 2 helping recipients to make efficient job choices during a period of financial stress and 3 minimizing the adverse incentives that may accompany partial wage replacement of course these goals can come into conflict for example if replacing wages for an unemployed worker also discourages that worker from aggressively searching for or accepting a new job and our discussion will focus on these conflicts with this background we then conclude with a discussion of the key policy issues that the unemployment

equilibrium in a market with sequential bargaining this paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and upon meeting initiate a bargaining process over the terms of the transaction the basic bargaining problem is treated with the strategic approach the paper derives the steady state equilibrium agreements analyzes their dependence on market conditions such as the relative numbers of agents of different types and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature this paper considers a market that operates in the following way pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process when two agents meet they initiate a bargaining process over the terms of the transaction if two agents reach an agreement a transaction takes place and they leave the market of course the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market these will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed also the expected length of time required to achieve an alternative transaction and the expected behavior of alternative partners the study of such a market mechanism is of interest for two reasons firstly it captures some realistic aspects of the trade in certain specific markets e g asset markets such as housing and some labor markets secondly it contributes to an understanding of the micro mechanisms of price formation and their role in shaping market outcomes in both cases the features studied are largely neglected in the traditional market equilibrium analyses the related literature includes the articles by diamond 4 5 diamond and maskin 6 mortensen 8 9 and zusman and bell 13 these articles consider markets of the type described above in which transactions are concluded at pairwise meetings of agents the major difference between our work and these articles is in the approach to the basic bargaining problem in the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way when the surplus is assumed to be divided equally the division rule is in fact nash s axiomatic bargaining solution in contrast the present paper treats the basic bargaining problem with the strategic approach see rubinstein 19 which constitutes an attempt to look into the bargaining black box this approach explicitly models the time dimension of the bargaining process describes in detail the bargaining procedure and justifies the agreement as a perfect equilibrium in

the impact of rent control on rents in the free sector in most cases rent control covers only a part of the housing stock this note provides a simple analysis of the impact which rent control and non price rationing exert on the rent in the free sector it is shown that depending on the rationing mechanism rents in the free sector can be higher or lower than in the absence of rent controls

household search and the aggregate labor market we develop a theoretical model with labour market frictions incomplete financial markets and with households which have two members households face unemployment risks but their members adjust their labour supplies to insure against unemployment we use the model to explain the cyclical properties of aggregate employment and participation as in the u s data the model predicts that the participation rate the fraction of individuals that want jobs is not strongly correlated with aggregate economic activity this property is in sharp contrast to the strongly procyclical participation predicted by both neoclassical models and models with search frictions when we assume bachelor households or households with infinitely many members complete markets in the two member household model and in the data primary earners are always in the labour force secondary earners have a mildly countercyclical participation rate and a mildly procyclical employment rate their behaviour insures the household against unemployment risks

an empirical examination of the sources of changes over time in the job finding rate using reservation wages and rejected wage offers we consider a structural dynamic job search model where nonstationarity originates from the change over time in the benefit level the job offer arrival rate and the wage offer distribution the model is estimated on the french sample of the echp taking advantage of direct observation of reservation wages rejected job offers and associated rejected wages we find that the offered wages deteriorate rapidly 13 8 over six months 19 2 over one year and 30 over two years and that changes in the wage offer distribution are the unique source of negative duration dependence in the hazard

equilibrium search unemployment endogenous participation and labor market flows the sustainability of welfare states requires high employment and high participation to raise the tax base to analyze labor supply in a world with market frictions we propose and solve a macro model of the labor market with unemployment and labor force participation as endogenous and distinct states in our world workers decisions of participating are determined by an entry decision and an exit decision a calibration of the model improves the usual representations of labor markets since it quantitatively accounts for the observed flows between employment and nonparticipation the paper investigates also the effect of payroll taxes and unemployment benefits on participation decisions taxes reduce entries and increase exits whereas unemployment benefits at a given job finding rate raise entries and have ambiguous effects on exits jel j2 j6

equilibrium search with time varying unemployment benefits we show how time varying unemployment benefits can generate equilibrium wage dispersion when identical firms post wages and homogeneous risk averse workers search for jobs we model a two tier system similar to real world ui programmes the unemployed initially receive benefit b eventually if a worker does not find a job the benefit falls to s the duration of high benefits is treated as an exponential random variable so the model is stationary we characterise the equilibrium and derive the comparative statics effects of changes in the two benefit levels and the expected duration of the high benefit state on equilibrium wages and unemployment in this article we analyse the implications of time varying unemployment insurance in an equilibrium search model we consider a two tier system i e a system with a high and a low benefit level this is the form taken by most real world ui programmes unemployed workers initially receive unemployment compensation but eventually if a worker does not find a job in the meantime this benefit is terminated the worker then has access only to lower social assistance benefits or in some countries to no benefits at all specifically we consider an economy in which newly unemployed workers initially receive unemployment benefits at rate b eventually if a worker does not find and accept a job in the meantime the unemployment benefit falls to a lower level s we assume the event that triggers the fall from b to s occurs at poisson rate k 1 this allows us to do our equilibrium analysis in a stationary framework while focusing on the most important aspect of time varying unemployment compensation namely that after some point the benefit falls this representation of time varying unemployment compensation enables us to derive a two point equilibrium wage distribution in a simple stationary setting we derive this equilibrium distribution using a wage posting model of sequential search we allow for free entry and exit of jobs and for matching frictions in the sense that the rate at which unemployed workers and vacant jobs contact one another depends on overall labour market tightness the use of a matching function to determine the job contact rate for workers and the worker contact rate for jobs is relatively unusual in wage posting models which typically assume a fixed contact rate our model can thus be viewed we thank participants at the tinbergen institute s conference on search and assignment for useful comments in particular we thank gerard van den berg who shared notes with us on an alternative approach to the topic of this paper we also thank lucas navarro for valuable research assistance 1 our model can be interpreted as one in which the search activity of unemployed workers is imperfectly monitored by a government agency suppose unemployed workers are punished by a reduction in their benefits from b to s when found to be putting forth less search effort than required and that detection of insufficient search effort occurs at poisson rate k if all workers choose to put forth less than the required effort and this is a plausible assumption given that workers are homogeneous then this sanctions model is equivalent to our model with time varying benefits that is our model can

unemployment insurance design inducing moving and retraining evidence suggests that unemployed individuals can sometimes aect their job prospects by undertaking a costly action like deciding to move or retrain realistically such an opportunity only arises for some individuals and the iden tity of those may be unobservable ex ante the problem of characterizing con strained optimal unemployment insurance in this case has been neglected in previous literature we construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled the model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobserv able job search in particular we derive closed form solutions showing that when the moving retraining incentive constraint binds unemployment bene ts should increase over the unemployment spell with an initial period with low bene ts and an increase after this period has expired

unemployment insurance take up rates in an equilibrium search model abstract from 1989 to 2012 on average 23 of those eligible for unemployment insurance ui benefits in the us did not collect them to understand the implications of these unclaimed benefits we develop a directed search model with an endogenous ui take up rate in equilibrium ui collectors have longer unemployment durations relative to non collectors the difference results from two forces a consumption effect and a private information effect as ui collection histories are unobservable we characterize both effects analytically and quantitatively with an endogenous take up rate the unemployment rate and average duration of unemployment respond significantly slower to changes in the ui benefit level relative to the standard model with a 100 take up rate the private information effect on non collector job finding rates plays an important role in this result

the role of unemployment insurance in an economy with liquidity constraints and moral hazard the potential welfare benefits of unemployment insurance along with the optimal replacement ratio are studied using a quantitative dynamic general equilibrium model to provide a role for unemployment insurance agents in our economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets in the absence of moral hazard replacement ratios as high as 65 are optimal and the welfare benefits of unemployment insurance are quite large however if there is moral hazard and the replacement ratio is not set optimally but is instead set to an empirically plausible value the economy can be much worse off than it would be without unemployment insurance

household adjustment to gasoline price change an analysis using 9 years of us survey data this paper examines the dynamics and composition of household adjustment to changes in the real price of gasoline using a panel of us households by decomposing the demand for gasoline into the demand for vehicle miles traveled and the demand for household composite miles per gallon we are able to add rich detail to the description of how households respond to gasoline price changes while obtaining total price elasticity estimates well within the range found in the literature we find that consumers initially respond to a price rise with a much larger decrease in consumption than would be indicated by the total elasticity in addition households respond to price changes by adjusting vehicle miles traveled more than composite miles per gallon in the year after a price change

integrating sustainability into city level co2 accounting social consumption pattern and income distribution abstract from a sustainability perspective city level co2 emissions require reconsiderations correspondingly the economy environment society nexus should be incorporated into city scale co2 accounting therefore in this study the semi closed io model is integrated with a hem to calculate co2 emissions arising from the social consumption pattern and income distribution and to explore economic drivers behind co2 variations this method is applied to a case study of beijing result demonstrate that beijing in 2012 witnessed something different from that in 2005 1 co2 emissions centred in the internal linkages of a broader class of consumption terms with high economic output mainly driven by interprovincial exports 2 imports increasingly helped decarbonize the mixed net forward and backward co2 linkages of consumption items and 3 income driven co2 emissions excluding demand side parts persisted which were more obvious on the supply side where households have more economy wide effects besides urban households played an essential role in household wide co2 reductions this paper ended with corresponding conclusions policy implications and directions for future work

duration dependent unemployment insurance payments and equilibrium unemployment this paper develops a model of equilibrium unemployment with duration dependent unemployment insurance ui payments as the government does not observe job offers there is a moral hazard problem because the option of receiving further ui payments raises the job seeker s value of remaining unemployment extending the duration of ui payments while reducing the level of payments to hold total generosity constant results in higher negotiated wages simulations suggest that a generosity neutral switch from a six month ui scheme to a one year scheme has small effects but a switch to an indefinite scheme has a large impact on wages and unemployment

optimal unemployment insurance in search equilibrium should unemployment benefits be paid indefinitely at a fixed rate or should the rate decline or increase over a worker s unemployment spell we examine these issues using an equilibrium model of search unemployment the model features worker firm bargaining over wages free entry of new jobs and endogenous search effort among the unemployed the main result is that an optimal insurance program implies a declining benefit sequence over the spell of unemployment numerical calibrations of the model suggest that there may be nontrivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system

rent control and housing maintenance controls on the conditions of renting housing can take many different forms with different consequences for the market this paper contains analyses of the effects of different regulatory forms on in particular the maintenance decision we review and extend previous approaches and find that not all of the familiar predictions of the basic neoclassical model can be generated by a more sophisticated model others have extended the basic model focusing on the maintenance aspect but we cannot agree entirely with their conclusions a careful specification of the relationship between costs and quality is necessary to derive useful predictions about the effects of rent and eviction controls

unemployment insurance in the presence of an informal sector we study the effect of ui bene ts in a typical developing country where the informal sector is sizeable and persistent in a partial equilibrium environment ruling out the macroeconomic consequences of ui benefits we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector short run unemployed receiving ui benefits or long run unemployed without ui benefits we perform comparative static exercises to understand how ui benefits affect unemployed workers effort to secure a formal job and their labor supply in the informal sector our model reveals that an increase in ui benefits generates two opposing effects for the short run unemployed first since search efforts cannot be monitored it generates moral hazard behaviours that lower effort second it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort even though in general it is ambiguous which effect dominates we show that for short durations ui benefits increase unemployed worker s effort to secure a formal sector job and decreases informal sector work

job matching when employment contracts suffer from moral hazard abstract we consider a job matching model where the relationships between firms and wealth constrained workers suffer from moral hazard specifically effort on the job is non contractible so that parties that are matched negotiate a bonus contract higher unemployment benefits affect the workers outside option the latter is improved for low skilled workers hence they receive a larger share of the surplus which strengthens their effort incentives and increases productivity effects are reversed for high skilled workers moreover raising benefit payments affects the proportion of successful matches which induces some firms to exit the economy and causes unemployment to increase

unemployment benefits and search effort in the uk labour market in this paper the impact that receipt of unemployment benefit has on job search effort is investigated utilizing data drawn from the 1984 labor force survey reduced form search effort equations are estimated conditional on the decision to seek work after controlling for potential selectivity bias personal characteristics and demand conditions those claiming benefit are shown to search more extensively than nonclaimants benefit claimants maintain a clear attachement to the labor market and appear more able to prolong search effort receipt of unemployment benefit increases the likelihood of contacting a job vacancy copyright 1991 by the london school of economics and political science

unemployment insurance in theory and practice a hallmark of modern labor economics is the close interplay between the development of theory data sources and econometric testing the evolution of the economic analysis of unemployment insurance provides a good illustration new theoretical approaches in particular job search theory have inspired a large amount of empirical research some of it methodologically innovative and most of it highly relevant for economic policy the paper presents a broad survey and an assessment of the economic analysis of unemployment insurance as it has evolved since the 1970s

climate change mitigation potential of norwegian households and the rebound effect abstract an increasing number of studies show that efficiency improvements alone will not be sufficient to attain the substantial emission reductions needed to mitigate global warming to a target of 2 c consumption side changes are likely to be needed to achieve sufficient emission reductions the united nations emphasize the importance of developed countries taking the lead in lowering emissions to achieve the sustainable development goals this paper assess to what extent norwegian households can lower their carbon footprint consistent with territorial emission reductions towards the 2 c target of global warming through implementing a set of behavioral actions we evaluate the efficacy of the set of actions both initially and after considering rebound effects a multiregional environmentally extended input output database is linked with the norwegian consumer expenditure survey to analyze both average and marginal expenditure per unit of increased income further linear programming is applied to examine the changes needed by households to reach different emission reduction targets we find that households implementing the full set of actions without re spending can obtain a 58 decrease in their carbon footprint when accounting for the effect of re spending this reduction drops to 24 35 which is not within the requirements of the 2 c target the optimization analysis suggests households can achieve reductions up to 45 by restricting re spending to specific goods and services this indicates that curbing the rebound effect is key to achieving real reductions in household carbon footprints we show that changing consumption patterns can significantly contribute to lowering anthropogenic greenhouse gas emissions without compromising the level of economic activity

optimal unemployment insurance abstract we investigate the design of an optimal unemployment insurance program using an equilibrium search model calibrated using data from the reemployment bonus experiments there are three main conclusions first insurance considerations suggest that the potential duration of ul benefits would be unlimited under an optimal program second if the potential duration to benefits were unlimited current replacement rates in the u s about 0 5 would probably be about right third the optimal replacement rate rises as the potential duration of benefits is increasingly limited reaching 1 when the potential duration of benefits is limited to 32 weeks

unemployment insurance and the business cycle what adjustments are needed author affiliation jeremy schwartz loyola university maryland department of economics 4501 north charles street sellinger 315 baltimore md 21210 usa e mail jsschwartz1 loyola edu acknowledgment i wish to thank donald parsons kerry richmond tara sinclair roberto samaniego and anthony yezer for their helpful comments and discussions regarding this article 1 introductionin most developed countries unemployment insurance ui is a static program that remains constant regardless of labor market conditions the united states along with canada are the only oecd countries that routinely adjust the generosity of their ui programs with the business cycle for instance during the 2007 2011 labor market downturn the length of time that ui benefits could be collected in the united states increased to an unprecedented 99 weeks from the standard 26 weeks available under normal economic conditions and the weekly benefit amount increased by 25 from an insurance perspective losing one s job during a recession is a greater loss than during an expansion and consequently a greater benefit may be appropriate however it is also known that increasing ui generosity has a negative effect on job search intensity and puts upward pressure on wages leading to lower job creation given these benefits and costs i seek to answer the following questions what structure of benefits over the business cycle is welfare maximizing is the current policy of increasing the generosity of ui during recessions optimal to accomplish this i develop a dynamic search model of the u s labor market which connects two parts of the optimal ui literature the first takes a partial equilibrium approach to determine the optimal adjustments to ui when job finding rates fall but does not consider ui s impact on job creation the second endogenizes job creation but does not address how the benefit system should adjust with the business cycle the model i present is unique in that it allows for both similar to studies that use the partial equilibrium approach one of the main factors driving the optimal ui program in this article is the moral hazard problem that arises from the inability to monitor the unemployed s job search shavell and weiss s 1979 seminal work shows that a sequence of ui benefits that declines with the length of unemployment provides the necessary incentives to encourage job search when the government s objective is to maximize welfare subject to a fixed budget although not explicitly modeling firm behavior hansen and imrohoroglu 1992 allow the ui budget to be endogenously determined similar to this article the authors also frame the moral hazard problem in terms of the government s inability to monitor rejections of job offers as well as allow for private savings they find that the optimal replacement rate is quite low just 0 15 in their baseline moral hazard case hopenhayn and nicolini 1997 focus on unobservable search intensity and develop a widely used recursive contract approach to determine the cost minimizing ui benefit schedule and employment tax where the policy parameters are contingent on an individual s complete work history a benefit amount that declines during one s unemployment spell and a subsequent employment tax that increases with the length of unemployment is optimal and results in utility falling continuously during unemployment pavoni 2007 extends this approach by including a guaranteed lower bound on utility which results in an optimal benefit schedule that falls sharply and includes a one time drop in benefits to a subsistence level alvarez parra and sanchez 2009 explicitly model this lower bound by including a hidden labor market where workers can continue to receive ui benefits undetected in this study the optimal benefit schedule falls slowly at first to ensure workers search in the formal sector and then falls sharply to zero allowing workers to derive consumption from the informal sector

optimal unemployment insurance this paper considers the design of an optimal unemployment insurance system the problem is modeled as a repeated principalagent problem involving a risk averse agent the unemployed worker and a risk neutral principal which cannot monitor the agent s search effort the optimal long term contract subject to the associated incentive constraints is characterized this contract involves a replacement ratio that decreases throughout the unemployment spell and a wage tax after reemployment that under some mild regularity conditions increases with the lenght of the unemployment spell some numerical results are presented that suggest that the gains from switching to this optimal unemployment insurance scheme could be quite large the performance of this optimal contract is also compared to alternative liquidity provision mechanisms

estimating incentive and welfare effects of nonstationary unemployment benefits the distribution of unemployment duration in our equilibrium matching model with spell dependent unemployment benefits displays time varying exit rates building on semi markov processes we translate these rates into an expression for the aggregate unemployment rate structural estimation using german microdata allows us to discuss the effects of an unemployment benefit reform hartz iv the reform reduced unemployment by less than 0 1 percentage points contrary to general beliefs the net wage for most skill and regional groups increased taking the insurance effect of unemployment benefits into account however the reform is welfare reducing for 76 of workers

the role of consumption and consumers in zero emission strategies abstract this article contributes to the theoretical and empirical discussions on how it could be possible to transform technical eco efficiency into reduced environmental impact of consumption the rebound effect is an important concept in this context the relevance of consumer behaviour is addressed within three important sectors for the zero emissions techniques and systems shopping of paper products energy use in household and waste management it is not only important how much the consumers buy but also what kinds of products they buy and how they use and dispose of them however the responsibility for a sustainable development should not entirely be put on the shoulders of the individual consumer

rent control its rationale and effects this paper discusses the rationale behind rent control and analyses its effects using a capital theory framework in combination with traditional bid rent analysis the experience in hong kong and o

optimal unemployment insurance with monitoring and sanctions this article analyses the design of optimal unemployment insurance in a search equilibrium framework where search effort among the unemployed is not perfectly observable we examine to what extent the optimal policy involves monitoring of search effort and benefit sanctions if observed search is deemed insufficient we find that introducing monitoring and sanctions represents a welfare improvement for reasonable estimates of monitoring costs this conclusion holds both relative to a system featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt

the role of workfare in striking a balance between incentives and insurance in the labour market unemployment insurance tends to distort incentives in the labour market affecting job search and wage formation adversely we show in a search matching model that this moral hazard problem can be reduced by attaching a workfare requirement to the eligibility conditions for claiming unemployment benefits even when workfare has no effects on human capital or productivity it is possible to improve labour market performance to create more jobs and lower unemployment by the introduction of workfare and also to improve welfare hence the incentive structure in the labour market can be improved by workfare policies rather than benefit reductions

improving incentives in unemployment insurance a review of recent research abstract this paper provides a review of the recent literature on how incentives in unemployment insurance can be improved we are particularly concerned with three instruments i e the duration of benefit payments or more generally the time sequencing of benefits monitoring in conjunction with sanctions and workfare our reading of the theoretical literature is that the case for imposing a penalty on less active job search is fairly solid a growing number of empirical studies including randomized experiments are in line with this conclusion

re entitlement effects with duration dependent unemployment insurance in a stochastic matching equilibrium in the context of a standard equilibrium matching framework this paper considers how a duration dependent unemployment insurance ui system affects the dynamics of unemployment and wages in an economy subject to stochastic job destruction shocks it establishes that re entitlement effects induced by a finite duration ui program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions these transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle

energy efficiency fallacies revisited abstract a number of governments including that of the uk subscribe to the belief that a national program devoted to raising energy efficiency throughout the economy provides a costless indeed profitable route to meeting international environmental obligations this is a seductive policy it constitutes the proverbial free lunch not only avoiding politically unpopular measures like outlawing taxing or rationing offending fuels or expanding non carboniferous sources of energy like nuclear power but doing so with economic benefit the author of this contribution came to doubt the validity of this solution when it was offered as a way of mitigating the effect of the opec price hikes of the 1970 maintaining that economically justified improvement in energy efficiency led to higher levels of energy consumption at the economy wide level than in the absence of any efficiency response more fundamentally he argues that there is no case for preferentially singling out energy from among all the resources available to us for efficiency maximization the least damaging policy is to determine targets enact the restrictive measures needed to curb consumption and then leave it to consumers intermediate and final to reallocate all the resources available to them to best effect subject to the new enacted constraints and any others they might be experiencing there is no reason to suppose that it is right for all the economic adjustment following a new resource constraint to take the form of improvements in the productivity of that resource alone as many others have argued any action to impose resource constraint entails an inevitable economic cost in the shape of a reduction in production and consumption possibilities there would be no free lunch in the last few years debate about the validity of these contentions has blossomed especially under the influence of writers on the western side of the atlantic in this contribution the author outlines the original arguments for questioning whether raised efficiency leads to lower consumption reports more recent developments and offers some insights as food for further thought