We study the features of optimal transfers to the non-employed which include those unable to work, the voluntarily unemployed, and the involuntarily unemployed. Both voluntary and involuntary unemployment are endogenous. We analyze optimal government policies in the presence of two types of...

A model where a portion of the population participates in illegal activities is developed. The propensity to participate in crimes depends on the probability and the opportunity cost of being arrested. The government can influence these variables by law enforcement expenditure and by social...

In this paper, we show that in a dynamic general equilibrium economy, the presence of moral hazard need not induce large cuts in optimal unemployment insurance benefits. We find that it takes a quite large proportion of "shirkers" to bend the generosity of the optimal unemployment insurance...