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Efficient Unemployment Insurance

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  • Daron Acemoglu
  • Robert Shimer

Abstract

This paper argues that moderate unemployment insurance not only reduces the uncertainty faced by risk-averse workers but also improves efficiency and raises output. We develop a model in which the decentralized equilibrium is inefficient without unemployment insurance, because the labor market endogenously creates jobs that provide risk-averse workers with low unemployment risk and low wages. Essentially, the labor market offers its own version of insurance.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 107 (1999)
Issue (Month): 5 (October)
Pages: 893-928

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Handle: RePEc:ucp:jpolec:v:107:y:1999:i:5:p:893-928

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References

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  1. Waiting for the perfect job does not work
    by Economic Logician in Economic Logic on 2011-04-04 14:03:00

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  1. > Labor Economics > Unemployment Insurance > Optimal Unemployment Insurance
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