AgEcon Search (University of Minnesota, USA) · 2010 · 13 citations · 0 references
Social SciencesEconomicsPublic PolicyLabor EconomicsPublic EconomicsWelfare PolicyIncentive SchemesJob SearchJob Search AssistanceUnemploymentWelfare EconomicsWelfare ReformAgent Effort ProvisionIncome Support PaymentsIncome Support SubsidiesJob Search IncentivesJob Search TheoryOptimal DesignSearch AssistanceSearch In Unemployment
Actual welfare programs often feature work requirements in exchange for benefits and job-search assistance. We study the optimal design of welfare programs for the unemployed when the principal/ government can solicit either job-search effort or work effort from the agent or, alternatively, can relieve the agent from supplying effort and search on her behalf. Our main result is that when the generosity of the welfare program (i.e., its initial promised utility) is low, then the optimal program should be based on work activities. In contrast, when the initial generosity, or available budget, is high the optimal program should be based on search —and search assistance— activities.