Social Insurance, Information Revelation, and Lack of Commitment

We study optimal provision of unemployment insurance in a model where agents privately observe arrival job opportunities and government’s ability to commit is imperfect. Imperfect commitment implies that full information revelation generally suboptimal. Social welfare convex the probability with which reveal their private information. In optimum, each agent provided incentives either fully his or not it at all. The contract can be decentralized by joint system disability benefits way resembles how these systems are used practice.