Optimal Size and Intensity of Job Search Assistance Programs
Type
discussion paper
Date Issued
2009-07-27
Author(s)
Ribi, Evelyn
Abstract
This paper derives the welfare optimal size and intensity of job search assistance programs in a general equilibrium model where the labor market is affected by search frictions. Both instruments have a priori ambiguous fiscal implications: their direct employment stimulating effects broaden the base of the labor income tax and increase revenues, while also incurring direct costs. At optimal levels, the policy instruments trade off the positive effects on the participants against a marginal increase in taxes, which distorts employment decisions and potentially labor market tightness. We find that the higher unemployment insurance benefits, the lower is the optimal program intensity. Further, the introduction of a job search assistance program is more likely to raise welfare if it is highly effective at improving participants' job search skills, direct program costs are low and if the general level of taxation in the economy and thus the labor market participation tax are high.
Language
English
Keywords
Job search assistance
optimal size
optimal intensity
unemployment insurance
HSG Classification
not classified
Refereed
No
Start page
1
End page
28
Pages
28
Subject(s)
Division(s)
Eprints ID
55153
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