Tuesday, August 5, 2014

Unemployment policy design: Australia creates some useful variation

Australia, it turns out, requires a giant (by US standards) number of applications each week by those on unemployment insurance, as well as making them perform community service!

What does that lead to? Fake applications of course, as discussed in this Guardian article. And fake applications waste the time and money of the firms that receive them.

The problem with using command and control, rather than prices, to influence behavior is that it is almost always impossible to control all the margins, which means you get strategic responses. Sometimes these are small enough to matter and sometimes they are not. I'd be curious to see a thoughtful and thorough cost-benefit analysis of the Australian application requirement.

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