The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard
AbstractThe potential welfare benefits of unemployment insurance, along with the optimal replacement ratio, are studied using a quantitative dynamic general equilibrium model. To provide a role for unemployment insurance, agents in the authors' economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets. In the absence of moral hazard, replacement ratios as high as 0.65 are optimal and the welfare benefits of unemployment insurance are quite large. However, if there is moral hazard and the replacement ratio is not set optimally, the economy can be much worse-off than it would be without unemployment insurance. Copyright 1992 by University of Chicago Press.
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Bibliographic InfoPaper provided by UCLA Department of Economics in its series UCLA Economics Working Papers with number 583.
Date of creation: 01 Jan 1990
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Web page: http://www.econ.ucla.edu/
Other versions of this item:
- Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-42, February.
- Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- New insights on optimal unemployment insurance
by Economic Logician in Economic Logic on 2008-12-23 12:36:00
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