This book examines unemployment insurance policy through a survey, taking stock of the theoretical work in the field of labor economics. It closely follows and assesses developments in the modelling of optimal unemployment insurance (UI) policies, beginning with the initial analytical findings produced in the second half of the 1970s. A main part of the survey is devoted to the two basic strands of analysis about, respectively, the optimal level of UI benefits and the optimal time profile of UI policy. The book has two different objectives. The first is to provide an essential summary of the individual models, with the intention of underscoring how a number of specific messages for the policy-maker can be derived from analytical constructions. It further emphasizes and comments on what the models deliver to UI policy-makers. The second objective is to stress the importance and extension of open questions in the field of the theoretical approach to the unemployment insurance issue. The survey discusses the multiplicity of heterogeneities of the labor world in particular as relevant for UI issues on the one side, and on the other hand, the independence of the two basic choices of UI policy, its meaning and its limits, and the possible forms of complementarity between these choices. The book is a must-read for researchers, students, and policy-makers interested in a better understanding of the field of labor economics in general, as well as unemployment insurance policies in particular.

Designing a good unemployment insurance scheme is a delicate matter. In a system with no or little insurance, households may be subject to a high income risk, whereas excessively generous unemployment insurance systems are known to lead to high unemployment rates and are costly both from a fiscal perspective and for society as a whole. Andreas Pollak investigates what an optimal unemployment insurance system would look like, i.e. a system that constitutes the best possible compromise between income security and incentives to work. Using theoretical economic models and complex numerical simulations, he studies the effects of benefit levels and payment durations on unemployment and welfare. As the models allow for considerable heterogeneity of households, including a history-dependent labor productivity, it is possible to analyze how certain policies affect individuals in a specific age, wealth or skill group. The most important aspect of an unemployment insurance system turns out to be the benefits paid to the long-term unemployed. If this parameter is chosen too high, a large number of households may get caught in a long spell of unemployment with little chance of finding work again. Based on the predictions in these models, the so-called "Hartz IV" labor market reform recently adopted in Germany should have highly favorable effects on the unemployment rates and welfare in the long run.

Countries with unemployment insurance (UI) program can effectively conduct a labor market policy and observe the flow of unemployed-employed. But should we just hand UI over to anyone who has no job? Do individual response to the program in terms of their decision to work or to enjoy more leisure unanimously the same across leisure type characteristic individuals? In a heterogeneous constructed labor search market we derive that introduction of the UI program increases the wage gap between the different individuals when the program impacts the productivity of firm positively. In an empirical investigation of the impact of unemployment benefits on the duration of unemployment using a job search model, the author specifies a distribution of duration of unemployment that was estimated using maximum likelihood estimation and find that there is in the National Longitudinal Survey of Youth (NLSY 97), 3 types of individuals, and the type of leisure individuals present an adverse response to the program: An increase in UI for the highest leisure type leads to a longer duration of unemployment. Whereas the lowest values of leisure do not tend to have an extended duration of unemployment from a positive change in UI. Finally, the response for the type 2 individuals is completely ambiguous as it could either see them having a prolonged duration of unemployment or a shortened period with no work. So a selective increase in unemployment insurance to those with a relatively low value of leisure may decrease the equilibrium rate of unemployment. The second part of the dissertation focuses on modeling money demand and shocks in Cote D'Ivoire for the period of 1960-2009. Unlike Drama and Yao (2010) our result suggests M1 is not in a long-run equilibrium with its determinants real income and expected inflation and therefore unstable. However, the broad definition M2 is cointegrated with its long-run determinants and it is therefore the most appropriate definition of money for the Cote D'Ivoire economy. As a consequence M2 can be used as an alternative to the interest rate as a long run monetary policy instrument.