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Unemployment insurance and the role of self-insurance

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Author Info

  • Atila Abdulkadiroglu

    ()
    (Department of Economics, Columbia University)

  • Burhanettin Kuruscu

    ()
    (University of Texas at Austin)

  • Aysegul Sahin

    ()
    (Federal Reserve Bank of New York)

Abstract

This paper employs a dynamic general equilibrium model to design and evaluate long-term unemployment insurance plans (plans that depend on workers' unemployment history) in economies with and without hidden savings. We show that optimal benefit schemes and welfare implications differ considerably in these two economies. Switching to long-term plans can improve welfare significantly in the absence of hidden savings. However, welfare gains are much lower when we consider hidden savings. Therefore, we argue that switching to long-term plans should not be a primary concern from a policy point of view.

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Bibliographic Info

Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-27.

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Length: 24 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:clu:wpaper:0102-27

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  1. Wang, Cheng & Williamson, Stephen D., 2002. "Moral Hazard, Optimal Unemployment Insurance and Experience Rating," Staff General Research Papers 10133, Iowa State University, Department of Economics.
  2. Daron Acemoglu & Robert Shimer, 1999. "Productivity Gains from Unemployment Insurance," NBER Working Papers 7352, National Bureau of Economic Research, Inc.
  3. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  4. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  5. Gary D. Hansen & Ayse Imrohoroglu, 1990. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," UCLA Economics Working Papers 583, UCLA Department of Economics.
  6. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  7. Bruce D. Meyer, 1991. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  8. Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  10. Paul Gomme, 1998. "Evolutionary programming as a solution technique for the Bellman equation," Working Paper 9816, Federal Reserve Bank of Cleveland.
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  1. > Labor Economics > Unemployment Insurance > Optimal Unemployment Insurance
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