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Voluntary income sharing and the design of unemployment insurance

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  • Dan Anderberg

Abstract

This paper uses a model of search unemployment to discuss the interaction between publicly provided insurance and informal insurance through voluntary income sharing, e.g., between spouses. Income sharing reduces the optimal level of public unemployment insurance. While it is always individually rational for partners to share income, the effect of voluntary income sharing on welfare will be negative unless partners can either observe each other's search behavior or are sufficiently altruistic towards each other. The model is also used to examine a family-based policy. The welfare gains from using such policy are argued to be small. Copyright Springer-Verlag Berlin Heidelberg 2003

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Bibliographic Info

Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 16 (2003)
Issue (Month): 1 (02)
Pages: 71-90

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Handle: RePEc:spr:jopoec:v:16:y:2003:i:1:p:71-90

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Related research

Keywords: JEL classification: H11; H31; J68; Key words: Income sharing; unemployment insurance; altruism;

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References

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  1. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1347-62, December.
  2. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  3. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  4. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  5. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(3), pages 508-46, June.
  6. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Philip Merrigan & Michel Normandin, 1994. "Precautionary Saving Motives: An Assessment from U.K. Time Series of Cross-Sections," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, Université du Québec à Montréal 29, CREFE, Université du Québec à Montréal.
  8. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 19(2), pages 370-99, April.
  9. Davidson, Carl & Woodbury, Stephen A., 1997. "Optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 64(3), pages 359-387, June.
  10. Stephen A. Woodbury, 2009. "Unemployment," Book chapters authored by Upjohn Institute researchers, W.E. Upjohn Institute for Employment Research, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orley Lobel (ed.), Labor and Employment Law and Economics, volume 2, pages 480-516 W.E. Upjohn Institute for Employment Research.
  11. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  12. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc.
  13. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 546-72, July.
  14. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, vol. 10(3), pages 403-425, December.
  15. Chami, Ralph & Fischer, Jeffrey H, 1996. "Altruism, Matching, and Nonmarket Insurance," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 34(4), pages 630-47, October.
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Cited by:
  1. Abdel-Rahmen El Lahga & Nicolas Moreau, 2007. "Would You Marry Me?: The Effects of Marriage on German Couples' Allocation of Time," SOEPpapers on Multidisciplinary Panel Data Research 12, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. El Lahga, AbdelRahmen & Moreau, Nicolas, 2007. "The Effects of Marriage on Couples’ Allocation of Time Between Market and Non-Market Hours," IZA Discussion Papers 2619, Institute for the Study of Labor (IZA).

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