Journal Article

Optimal Unemployment Insurance and Employment History

Hugo A. Hopenhayn and Juan Pablo Nicolini

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 76, issue 3, pages 1049-1070
Published in print July 2009 | ISSN: 0034-6527
Published online July 2009 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/j.1467-937X.2009.00555.x
Optimal Unemployment Insurance and Employment History

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  • Information, Knowledge, and Uncertainy
  • Mobility, Unemployment, and Vacancies

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In existing unemployment insurance programmes, it is standard to condition eligibility on the previous employment record of unemployed workers. The purpose of this article is to study conditions under which the efficient contract exhibits these properties. In order to do so, we characterize the optimal unemployment insurance contract in asymmetric information environments in which workers experience multiple unemployment spells. We show that if quits cannot be distinguished from layoffs, it is optimal to condition the benefits paid to unemployed workers on their employment history, in particular, the coverage should increase with the length of previous employment spells.

Keywords: D82; D86; J65

Journal Article.  9243 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Mobility, Unemployment, and Vacancies

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