Optimal unemployment benefit policy and the firm productivity distribution

Tomer Blumkin, Leif Danziger*, Eran Yashiv

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper provides a novel justification for a declining time profile of unemployment benefits that does not rely on moral-hazard or consumption-smoothing considerations. We consider a simple search environment with homogeneous workers and low- and high-productivity firms. By introducing a declining time profile of benefits, the government can affect the equilibrium wage profile in a manner that enhances the sorting of workers across low- and high-productivity firms. We demonstrate that optimal government policy depends on the dispersion and skewness of the firms’ productivity distribution.

Original languageEnglish
Pages (from-to)36-59
Number of pages24
JournalInternational Tax and Public Finance
Issue number1
StatePublished - 1 Feb 2017


  • Declining unemployment benefits
  • Dispersion
  • Productivity distribution
  • Skewness
  • Unemployment benefit policy


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