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Optimal Unemployment Insurance : Consumption versus Expenditure

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorCampos, Rodolfo G.
dc.contributor.authorReggio, Iliana
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economíaes
dc.date.accessioned2015-02-12T13:13:47Z
dc.date.available2015-02-12T13:13:47Z
dc.date.issued2015-02-01
dc.description.abstractWe study the optimal provision of unemployment insurance (UI) in a framework that distinguishes between consumption and expenditure. We derive a "sufficient statistics" formula for optimal UI that is expressed terms of observable variables and can therefore be used in applied work. Recent research has shown that unemployed households pay less per unit of consumption than employed households. This finding has two counteracting effects on the optimal level of UI. On the one hand, consumption smoothing benefits identified from expenditure data overestimate the true marginal benefits of UI. On the other hand, UI benefits become more valuable because they buy more consumption when unemployed. In an optimal design, which effect dominates depends on the curvature of the utility function. We show that for relative risk aversion larger than one the first effect dominates, leading to lower levels of optimal UI.en
dc.description.sponsorshipWe gratefully acknowledge financial support by the Spanish Ministerio de Economía y Competitividad (Grants ECO2012-38134 and ECO2012-31358).en
dc.format.mimetypeapplication/pdf
dc.identifier.issn2340-5031
dc.identifier.repecwe1502
dc.identifier.urihttps://hdl.handle.net/10016/20042
dc.identifier.uxxiDT/0000001324es
dc.language.isoeng
dc.relation.ispartofseriesUC3M Working papers. Economicsen
dc.relation.ispartofseries15-02es
dc.relation.projectIDGobierno de España. ECO2012-38134es
dc.relation.projectIDGobierno de España. ECO2012-31358es
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 Españaes
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.jelD11
dc.subject.jelJ64
dc.subject.jelJ65
dc.subject.jelJ68
dc.subject.otherconsumptionen
dc.subject.otherexpenditureen
dc.subject.otherconsumption-smoothingen
dc.subject.othersocial insuranceen
dc.subject.otherunemployment insuranceen
dc.titleOptimal Unemployment Insurance : Consumption versus Expenditureen
dc.typeworking paper*
dc.type.hasVersionSMUR*
dspace.entity.typePublication
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