Public Economics and Policy Seminar - Damian Osterwalder (University of Zurich)

Despite its importance, we have a limited understanding of repeated unemployment and its consequences for optimal unemployment insurance. We provide novel and credible empirical evidence that individuals in a repeated unemployment spell respond differently to changes in the generosity of unemployment insurance (UI) benefits compared to individuals in their first spell. Using a sufficient-statistics approach, we evaluate the implications of repeated unemployment for the optimal design of UI policies. Taken together, these results imply that repeated unemployment spells should have more generous UI benefits, in contrast to existing unemployment insurance systems.