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Self insurance and public employment programs

Author

Listed:
  • Sunanda Roy

    (Drake university)

Abstract

The paper studies the labor allocation decision by households faced with non-insurable labor income risks and establishes a case for a government sponsored public employment program as a provider of self-insurance to such households. We study the equilibria of a two period general equilibrium model with incomplete markets and two types of firms - a privately owned one offering a risky wage contract and a public works program offering a relatively riskfree one. We show that the employment level in the public program is higher in our model economy compared to that in a benchmark complete markets economy.

Suggested Citation

  • Sunanda Roy, 2007. "Self insurance and public employment programs," Economics Bulletin, AccessEcon, vol. 4(31), pages 1-15.
    • Handle: RePEc:ebl:ecbull:eb-07d50001
    as

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    References listed on IDEAS

    as
    1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    2. Drèze,Jacques, 1993. "Underemployment Equilibria," Cambridge Books, Cambridge University Press, number 9780521435246, January.
    3. Robert Townsend & Rolf Mueller, 1998. "Mechanism Design and Village Economies: From Credit, to Tenancy, to Cropping Groups," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 119-172, January.
    4. Matz Dahlberg & Anders Forslund, 2005. "Direct Displacement Effects of Labour Market Programmes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(3), pages 475-494, September.
    5. Fredriksson, Peter, 1999. "The political economy of public employment programs," Journal of Public Economics, Elsevier, vol. 72(3), pages 487-504, June.
    6. Murgai, Rinku & Ravallion, Martin, 2005. "Is a guaranteed living wage a good anti-poverty policy?," Policy Research Working Paper Series 3640, The World Bank.
    7. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-190, March.
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    More about this item

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • H0 - Public Economics - - General

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