On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation / Robert Shimer, Iván Werning.

Format:

Book

Author/Creator:

Shimer, Robert.

Contributor:

National Bureau of Economic Research.

Werning, Iván.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12230.

NBER working paper series no. w12230

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

This paper studies the optimal timing of unemployment insurance subsidies in a McCall search model. Risk-averse workers sequentially sample random job opportunities. Our model distinguishes unemployment subsidies from consumption during unemployment by allowing workers to save and borrow freely. When the insurance agency faces a group of homogeneous workers solving stationary search problems, the optimal subsidies are independent of unemployment duration. In contrast, when workers are heterogeneous or when human capital depreciates during the spell, the optimal subsidy is no longer constant. We explore the main determinants of the shape of the optimal subsidy schedule, isolating forces for subsidies to optimally rise or fall with duration.

Notes:

Print version record

May 2006.