@article{Setty:275747,
      recid = {275747},
      author = {Setty, Ofer},
      title = {Optimal unemployment insurance with monitoring},
      address = {2010},
      number = {2123-2018-5099},
      pages = {35},
      year = {2010},
      abstract = {Monitoring the job-search activities of unemployed workers  is a common government intervention. Typically, a  caseworker reviews the unemployed worker's employment  contacts at some frequency, and applies sanctions if  certain requirements are not met. I model monitoring in the  optimal unemployment insurance framework of Hopenhayn and  Nicolini (1997), where job-search effort is private  information for the unemployed worker. In the model,  monitoring provides costly information upon which the  government conditions the unemployment benefits. In the  optimal monitoring scheme, endogenous sanctions and  rewards, together with random monitoring, create effective  job-search incentives for the unemployed worker. I  calibrate the model to the US economy and find that the  addition of optimal monitoring to the optimal unemployment  insurance scheme decreases the variance of consumption by  about two thirds and eliminates roughly half of the  government's cost. I also find that compared with the  optimal monitoring scheme, US states monitor too much and  impose the sanctions over too short a time span. For the US  on average, shifting to the optimal monitoring policy would  generate savings of about $500 per unemployment spell.},
      url = {http://ageconsearch.umn.edu/record/275747},
      doi = {https://doi.org/10.22004/ag.econ.275747},
}