In this article, we ask heterogeneous agents in a dynamic general equilibrium economy to vote on the generosity of their unemployment insurance program. We observe the influence on their vote of (1) moral hazard, (2) private alternatives, and (3) changes in employment status. Agents differ in skills, employment probabilities, income prospects, and assets. For a calibration to the United States, we show that: (1) in contrast to the literature, plausible levels of moral hazard need not induce large cuts in optimal benefits. (2) Switching to private insurance is rejected for most status quo, though it would be as generous. (3) Skill groups vote as a block. For reasonable discount factors, solidarity is never broken simultaneously for more than one group.
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 42 (2001) Issue (Month): 4 (November) Pages: 903-23 Download reference. The following formats are available: HTML
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John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 1998.
"Equilibrium Unemployment Insurance,"
Economics Working Papers
605, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
[Downloadable!]
Other versions:
Hassler, J. & Mora, J.V.R. & Storesletten, K. & Zilibotti, F., 1999.
"Equilibrium Unemployment Insurance,"
Papers
665, Stockholm - International Economic Studies.
Hassler, John & Mora, José & Storesletten, Kjetil & Zilibotti, Fabrizio, 1999.
"Equilibrium Unemployment Insurance,"
Seminar Papers
665, Stockholm University, Institute for International Economic Studies.
[Downloadable!]
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005.
"A Positive Theory Of Geographic Mobility And Social Insurance,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, 02.
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