Unemployment Insurance

Question 1

controversial debate about unemployment benefits

Answer 1

benefits: helps people in times of need

cost: reduces incentive to search for work while unemployed

Question 2

eligibility for jobseeker in Aus

Answer 2

aged between 22 and pension age
meet residency requirements
meet income and asset tests
search requirement: unemployed and looking for work

Question 3

unique features of unemployment insurance in australia

Answer 3

payment amount not linked to prior earnings
no experience rating
no limit on duration of benefits
eligibility not contingent on prior work history

Question 4

optimal unemployment insurance

Answer 4

trades-off insurance value vs efficiency costs
in principle, provide full insurance with 100% replacement rate if there is no moral hazard

Question 5

unemployment insurance with moral hazard

Answer 5

with moral hazard, 100% replacement would eliminate incentives to find a job

Question 6

optimal replacement rate determined by

Answer 6

depends negatively on the size of moral hazard and positively on how much people value insurance

Question 7

how does moral hazard in UI manifest itself

Answer 7

duration of unemployment

Question 8

summary of empirical findings on UI

Answer 8

higher benefit level leads to longer unemployment durations (moral hazard cost)

higher benefit level leads to more consumption while unemployed (consumption smoothing benefit)

UI benefits have no beneficial effects on long-term job outcomes