Should Unemployment Insurance Vary with the Unemployment Rate? Theory and Evidence

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Kory Kroft; Matthew J. Notowidigdo;
  • Subject: Unemployment Insurance, Business Cycle, Moral Hazard, Consumption Smoothing
    • jel: jel:H5 | jel:J64 | jel:J65

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 th... View more
  • References (27)
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