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Abstract:
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This dissertation contains three chapters in macroeconomics that study the financing and provision of unemployment insurance . The first chapter studies cross -sectional differences in U .S . state provision of unemployment insurance and the distortionary effects of federal unemployment benefit subsidies in a dynamic labor search model . The paper has two main findings . First , differences in the job -separation rate and the job -finding rate within the model can generate the negative correlation between the average benefit provided by a state and the state's unemployment rate , as observed in the data . Secondly , the model shows how the federal subsidization of unemployment benefit extensions in high -unemployment states causes an over -provision of the benefit , which in turn increases the unemployment rate in those states . Because the extensions are federally subsidized , however , the welfare loss due to the distortion is offset by the benefits of redistribution between states .
The second chapter studies the optimal government monitoring of job search effort by unemployment insurance recipients . The theoretical model is a labor search economy with imperfectly observable search effort . The government observes a signal that is correlated with job search effort and must decide the threshold level of the signal that determines continued UI eligibility . The results of the numerical analysis show that the government increases this threshold level at each duration of the unemployment spell . Further , an increasing threshold profile can generate a sharp increase and subsequent drop -off in search effort near the expiration of benefits as observed in the data .
The third chapter studies the optimal mix of distortionary capital and labor taxes in an altruistic economy . This problem is addressed by solving a dynamic general equilibrium model with production , in which finitely -lived individuals are linked inter -generationally through altruistic preferences . The government is tasked with financing an exogenous stream of government spending by levying distortionary capital and labor income taxes in a way that minimizes welfare loss in the economy . The numerical results show that nearly all government revenue should be raised through the labor income tax . |