IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v23y2019i04p1586-1621_00.html
   My bibliography  Save this article

Ui Eligibility Rule, Moral Hazard, And Optimal Unemployment Transfer Scheme

Author

Listed:
  • Zhang, Min
  • Pan, Jia

Abstract

This paper derives the optimal unemployment insurance (UI) transfer scheme, UI benefits, and UI contribution fees: When a worker has to earn his or her UI eligibility through work, the UI benefits do not last forever, and the UI agency has imperfect monitoring power on the strategic behavior of the worker. We show that the consideration of the UI eligibility rule generates the effective entitlement effect, which serves as an additional incentive device and alters the nature of the optimal UI transfer scheme established in literature. In contrast with previous studies, we find that when the effective entitlement effect is large, it completely removes the moral hazards in job searches, job acceptances, and job quits. As a result, the optimal UI benefits and contribution fees become constant. Calibrated to the data in the United States, the model reproduces some key features of the existing UI system.

Suggested Citation

  • Zhang, Min & Pan, Jia, 2019. "Ui Eligibility Rule, Moral Hazard, And Optimal Unemployment Transfer Scheme," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1586-1621, June.
    • Handle: RePEc:cup:macdyn:v:23:y:2019:i:04:p:1586-1621_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100517000359/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:23:y:2019:i:04:p:1586-1621_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.