Envy-minimizing unemployment benefits |
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Authors: | Christian Arnsperger David de la Croix |
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Institution: | (1) National Fund for Scientific Research (Belgium) and IRES, University of Louvain, Place Montesquieu 3, B-1348 Louvain-la-Neuve, Belgium |
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Abstract: | This paper offers an analysis of the optimality of unemployment benefits based on the concept of no-envy. Using a general
equilibrium framework with uncertainty, we derive the conditions for a trade-off between the intensity of envy and the expected
percentage of envious persons. If the government's sensitivity to the intensity of envy is not too strong (alongside conditions
on households' utilities), the optimal benefit is positive and below the full-insurance level. We also show that, for a low
enough sensitivity to the intensity of envy, the optimal replacement ratio decreases with unfavorable changes in the distribution
of the technological shock. |
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Keywords: | D63 H53 J65 |
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