Theoretical modeling of unemployment insurance (UI) has typically focused on the benefit level or the replacement rate, ., the fraction of earnings replaced by unemployment benefits. Of course, the design of an optimal UI system raises many other issues. For example, should there be a time limit on benefit receipt? To what extent should benefit recipients be induced to follow prescribed search requirements? Is there a case for a work requirement in exchange for benefits? The present paper contributes to the welfare analysis of UI by analyzing three different means of improving the efficiency of UI. The first instrument.
