I study the consequences of heterogeneity of skills for the design of an optimal unemployment insurance, using a principal-agent set-up with a risk neutral insurer and infinitely lived risk averse agents. Agents, who are characterised by different productivities or skills, are employed by firms...

The issue of whether unemployment benefits should increase or decrease over the unemployment spell is analyzed in a tractable model allowing moral hazard, adverse selection and hidden saving. Analytical results show that when the search productivity of unemployed is constant over the...

We derive the shape of optimal unemployment insurance (UI) contracts when agents can exert search effort but face different search costs and have private information about their type. We derive a recursive solution of our dynamic adverse selection problem with repeated moral hazard. Conditions...

Evidence suggests that unemployed individuals can sometimes affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex-ante. The problem of...

Evidence suggests that unemployed individuals sometimes can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity arises only for some individuals and the identity of those is unobservable. Unemployment insurance should...

Unemployment Accounts (UA) are mandatory individual saving accounts that can be used by governments as an alternative to the Unemployment Insurance (UI) system. I study a two tier UA-UI system where the unemployed withdraw from their unemployment account until it is exhausted and then receive...

A vast theoretical and empirical literature has focused on the effects of unemployment insurance benefits on the decisions of the recipients and how these decisions influence their labor market outcomes. Three strands of literature are discussed in this paper: (i) the impact of unemployment...

We study how optimal unemployment insurance (UI) benefits vary over the business cycle by estimating how the moral hazard cost and the consumption smoothing benefit of UI vary with the unemployment rate. We find that the moral hazard cost is procyclical, greater when the unemployment rate is...

Examples of educational mismatch and overqualifcation in the labour market can often be found in the same office building – the clerical worker with a bachelor’s degree reporting to a manager with a high school education – as an example. Some have argued that mismatch in...