The University of Southampton
University of Southampton Institutional Repository

Unemployment insurance design: inducing moving and retraining

Hassler, John and Rodríguez Mora, José Vicente (2007) Unemployment insurance design: inducing moving and retraining , London, UK Centre for Economic Policy Research 49pp. (Discussion Papers in Economics and Econometrics, 702).

Record type: Monograph (Discussion Paper)


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 characterizing constrained optimal unemployment insurance in this case has been neglected in previous literature. We construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled. The model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobservable job-search. In particular, we derive closed-form solutions showing that when the moving/retraining incentive constraint binds, unemployment benefits should increase over the unemployment spell, with an initial period with low benefits and an increase after this period has expired

PDF 0702.pdf - Author's Original
Download (356kB)
PDF CEPR-DP6364.pdf - Version of Record
Restricted to Repository staff only
Download (366kB)

More information

Published date: 29 June 2007
Keywords: unemployment benefits, search, moral hazard, adverse selection


Local EPrints ID: 47486
ISSN: 0265-8003
PURE UUID: 14cbdc45-29cd-4334-adf1-1a0be677559a

Catalogue record

Date deposited: 01 Aug 2007
Last modified: 17 Jul 2017 15:04

Export record


Author: John Hassler
Author: José Vicente Rodríguez Mora

University divisions

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton:

ePrints Soton supports OAI 2.0 with a base URL of

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.