Labour market policies for the unemployed combine passive income support with active measures that aim at improving jobseekers' employment prospects. This paper extends the theoretical framework developed by Pavoni and Violante (2005a) for the optimal choice between different active and passive...

To recover a version of Barro's (1979) `random walk' tax smoothing outcome, we modify Lucas and Stokey's (1983) economy to permit only risk--free debt. This imparts near unit root like behavior to government debt, independently of the government expenditure process, a realistic outcome in the...

In an ongoing organization, such as a large law partnership firm, employees are motivated not only by current rewards but also by the prospect of promotion, and the opportunity to make the rules in the future. This leads to a recursive contract design problem in an overlapping generations...

A Welfare-to-Work (WTW) program is a mix of government expenditures on various labor market policies targeted to the unemployed (e.g., unemployment insurance, job search monitoring, social assistance, wage subsidies). This paper provides a dynamic principal-agent framework suitable for analyzing...

In an ongoing organization, such as a large law partnership firm, employees are motivated not only by current rewards but also by the prospect of promotion, and the opportunity to make the rules in the future. This leads to a recursive contract design problem in an overlapping generations...

We develop general recursive methods to solve for optimal contracts in dynamic principal-agent environments with hidden states and hidden actions. In our baseline model, the principal observes nothing other than transfers. Nevertheless, optimal incentive-constrained insurance can be attained. We...

We derive the shape of optimal unemployment insurance (UI) contracts when agents can exert search effort but face different search costs and have private information about their type. We derive a recursive solution of our dynamic adverse selection problem with repeated moral hazard. Conditions...

We ask whether offering a menu of unemployment insurance contracts is welfare improving in a heterogeneous population. We adopt a repeated moral-hazard framework as in Shavell/Weiss (1979) supplemented by unobserved heterogeneity about agents’ job opportunities. Our main theoretical...

At the end of working life, as well as reducing unemployment benefits, the unemployment-insurance agency could apply pension tax instead of wage tax. First, the pension tax provides greater incentives as the value of re-employment is tax-free. Second, the short job duration before retirement...