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A Macroeconomic Theory of Optimal Unemployment Insurance / Camille Landais, Pascal Michaillat, Emmanuel Saez.
- Format:
- Book
- Author/Creator:
- Landais, Camille.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16526.
- NBER working paper series no. w16526
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- We develop a theory of optimal unemployment insurance (UI) that accounts for workers' job-search behavior and firms' hiring behavior. The optimal replacement rate of UI is the conventional Baily [1978]-Chetty [2006a] rate, which solves the trade-off between insurance and job-search incentives, plus a correction term, which is positive when UI brings the labor market tightness closer to efficiency. For instance, when tightness is inefficiently low, optimal UI is more generous than the Baily-Chetty rate if UI raises tightness and less generous if UI lowers tightness. We propose empirical criteria to determine whether tightness is inefficiently high or low and whether UI raises or lowers tightness. The theory has implications for the cyclicality of optimal UI.
- Notes:
- Print version record
- November 2010.
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