Optimal Unemployment Insurance : Consumption versus Expenditure

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dc.contributor.author Campos, Rodolfo G.
dc.contributor.author Reggio, Iliana
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned 2015-02-12T13:13:47Z
dc.date.available 2015-02-12T13:13:47Z
dc.date.issued 2015-02-01
dc.identifier.issn 2340-5031
dc.identifier.uri http://hdl.handle.net/10016/20042
dc.description.abstract We 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.
dc.description.sponsorship We gratefully acknowledge financial support by the Spanish Ministerio de Economía y Competitividad (Grants ECO2012-38134 and ECO2012-31358).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Economics
dc.relation.ispartofseries 15-02
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other consumption
dc.subject.other expenditure
dc.subject.other consumption-smoothing
dc.subject.other social insurance
dc.subject.other unemployment insurance
dc.title Optimal Unemployment Insurance : Consumption versus Expenditure
dc.type workingPaper
dc.subject.jel D11
dc.subject.jel J64
dc.subject.jel J65
dc.subject.jel J68
dc.relation.projectID Gobierno de España. ECO2012-38134
dc.relation.projectID Gobierno de España. ECO2012-31358
dc.type.version submitedVersion
dc.identifier.uxxi DT/0000001324
dc.identifier.repec we1502
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