Scandinavian Working Papers in Economics
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IFAU - Institute for Evaluation of Labour Market and Education Policy Working Paper Series
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2002:21:
Optimal unemployment insurance with monitoring and sanctions

Jan Boone (), Peter Fredriksson (), Bertil Holmlund () and Jan van Ours ()

Abstract: This paper analyzes 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.

Keywords: Unemployment insurance; search; sanctions; (follow links to similar papers)

JEL-Codes: J64; J65; J68; (follow links to similar papers)

29 pages, November 26, 2002

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This paper is published as:
Boone, Jan, Peter Fredriksson, Bertil Holmlund and Jan van Ours, (2007), 'Optimal unemployment insurance with monitoring and sanctions', Economic Journal, pages 399-421

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