This Paper explores the optimal interaction between the tax system and unemployment compensation in insuring people … against the risks of involuntary unemployment and low ability. To that end, we introduce search unemployment in a model of … and the unemployment benefit) increases if, for efficient agents, the participation constraint (governing job search …

This Paper analyses 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 … featuring indefinite payments of benefits and a system with a time limit on unemployment benefit receipt. The optimal sanction …