Unemployment Insurance: Risk Sharing Versus Efficiency
AbstractTwo models of spot labor markets are presented in which labor suppliers have heterogeneous attitudes towards effort and in which uncertainty prevails on labor productivity and growth. The problem of selecting efficient rules to manage unemployment insurance (UI) systems is considered. We show that there does not exist any system which combines an efficient allocation of labor with an efficient allocation of risks among employees, unemployed workers and capital-owners. Pareto-efficient policy rules are a best compromise between these two conflicting objectives. It implies that productive efficiency could be improved in periods of mass unemployment by reducing UI benefits. That would be at the expense of more inefficiencies in the sharing of macroeconomic risks. At the optimum, the UI benefit is positively correlated to growth and it is negatively correlated to labor productivity. The Geneva Papers on Risk and Insurance Theory (1991) 16, 59–74. doi:10.1007/BF00942857
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.
Volume (Year): 16 (1991)
Issue (Month): 1 (June)
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- Marc Fleurbaey & Stéphane Zuber, 2014.
"Fair management of social risk,"
Documents de travail du Centre d'Economie de la Sorbonne
14016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Marc Fleurbaey & Stéphane Zuber, 2014. "Fair management of social risk," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00973480, HAL.
- Gourieroux, C. & Scaillet, O., 1997. "Unemployment insurance and mortgages," Insurance: Mathematics and Economics, Elsevier, vol. 20(3), pages 173-195, October.
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