Optimal Unemployment Insurance in Labor Market Equilibrium when Workers can Self-Insure

I develop an equilibrium matching model in which workers have preferences over consumption and hours of work and are able to self-insure against unemployment risks by accumulating precautionary wealth. Wages and working hours are the outcomes of Nash bargaining between workers and firms. I focus on an unemployment insurance (UI) system with constant benefits of indefinite duration financed through a constant labor income tax. Low-wealth individuals work unusually long hours to quickly accumulate precautionary wealth. The Frisch elasticity of labor supply governs a worker’s utility cost of supplying labor and hence the cost of accumulating precautionary wealth. A lower elasticity implies a higher utility cost of adjusting hours. I take Frisch elasticities from recent research using household data and find that the optimal level of UI benefits is between 34 and 40 percent of average compensation. The potential welfare gains from moving from current 34 percent to the optimal policy are as large as 0.13 percent of lifetime consumption. The optimal replacement rate is decreasing in the Frisch elasticity of labor supply.Unemployment insurance; Labor supply; Matching equilibrium; Self-insurance

Retraining the Unemployed in a Matching Model with Turbulence

I investigate to what degree differences in retraining opportunities are responsible for the divergence of unemployment rates between the U.S. and Europe since the early 1980s. I provide some evidence for higher retraining rates in the U.S. as compared to Europe and further show that there is tremendous heterogeneity across OECD countries with respect to retraining. In my model, unemployed workers not only search for jobs but also for suitable retraining programs. I find that when it becomes more difficult to find suitable retraining programs, enrollment rates, productivity and the unemployment rate decline. Furthermore, this paper is the first attempt to investigate the role of retraining in economies that are subject to economic turbulences as described by Ljungqvist and Sargent (1998, 2004). Using a similar parametrization as Ljungqvist and Sargent (2004), I find that the generosity of unemployment benefits, the main driving force in their model, is not an important determinant of unemployment, even during tumultuous economic times, if sufficiently good retraining institutions are available. Economies with more flexible retraining institutions adjust better to economic turbulence, and as a result, feature lower unemployment rates and higher productivity and output. My results suggest that differences in retraining opportunities play an important role in explaining cross-country differences in unemployment rates.Retraining the Unemployed, European Unemployment, Economic Turbulence

Review of Estimates of the Frisch Elasticity of Labor Supply

Among the models that CBO uses to analyze the economic effects of changes in federal fiscal policy is a life-cycle growth model. That model requires an estimate of the responsiveness of the supply of labor to a one-time temporary change in after-tax compensation, which is described by the so-called Frisch elasticity. CBO incorporates into its analyses an estimate of the Frisch elasticity that ranges from 0.27 to 0.53, with a central estimate of 0.40. This paper describes how CBO derived that range from the research literature

Unambiguous interpretation of atomically resolved force microscopy images of an insulator

The (111) surface of CaF 2 was imaged with dynamic mode scanning force microscopy and modeled using atomistic simulation. Both experiment and theory showed a clear triangular contrast pattern in images, and theory demonstrated that the contrast pattern is due to the interaction of a positive electrostatic potential tip with fluorine ions in the two topmost surface layers. We find a good agreement of position and relative height of scan line features between theory and experiment and thus establish for the first time an unambiguous identification of sublattices of an insulator imaged by force microscopy

Measures of Predictive Success for Rating Functions

Aim of our paper is to develop an adequate measure of predictive success and accuracy of rating functions. At first, we show that the common measures of rating accuracy, i.e. area under curve and accuracy ratio, respectively, lack of informative value of single rating classes. Selten (1991) builds up an axiomatic framework for measures of predictive success. Therefore, we introduce a measure for rating functions that fulfills the axioms proposed by Selten (1991). Furthermore, an empirical investigation analyzes predictive power and accuracy of Standard & Poor's and Moody's ratings, and compares the rankings according to area under curve and our measure.Accuracy Measure, Rating Functions, Predictive Success, Discriminative Power

Determination of the essence of the economic security of the country

The study of existing approaches to the definition of the state’s economic security has allowed us to suggest that the state’s economic security is a state of the state’s economy, for which sustainable and scientifically based methods have been created to neutralize the negative impact of internal and external threats, the necessary conditions are created for the state’s sustainable socio-economic development economic interests and improving the welfare of citizens

Portfolio Management under Asymmetric Dependence and Distribution

Aim of our paper is to analyze the enhancement of portfolio management by using more sophisticated assumptions about distributions and dependencies of stock returns. We assume a skewed t-distribution of the returns according to Azzalini and Capitanio (2003) and a dependency structure following a Clayton copula. The risk measure applied to our portfolio selection changed from traditional portfolio variance to downside-oriented conditional value-at-risk. The empirical results show a superior performance of our approach compared to the Markowitz approach and to the approach proposed by Hatherley and Alcock (2007) on a risk-adjusted basis. The approach is applied on daily stock returns of 16 stocks of the EURO STOXX 50.Asymmetric Dependency, Copula, Skewed t-Distribution, Conditional Value-at-Risk, Portfolio Optimization