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Optimal Social Insurance, Incentives, and Transition

Working Paper 546 | Published March 1, 1995

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Optimal Social Insurance, Incentives, and Transition

Abstract

We study transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty. When there are incentive problems in this rematching process, the optimal scheme may involve forced layoffs, involuntary unemployment, and a recession.