Unemployment Insurance under Moral Hazard and Limited Commitment: Public versus Private Provision
AbstractThis paper analyses a model of private unemployment insurance under limited commitment and a model of public unemployment insurance subject to moral hazard in an economy with a continuum of agents and an infinite time horizon. The dynamic and steady-state properties of the optimum private unemployment insurance scheme are established. The interaction between the public and private unemployment insurance schemes is examined. Examples are constructed to show that for some parameter values increased public insurance can reduce welfare by crowding out private insurance more than one-to-one and that for other parameter values a mix of both public and private insurance can be welfare maximising.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 95.
Date of creation: Mar 2004
Date of revision:
Social Insurance; Moral Hazard; Limited Commitment; Unemployment Insurance; Crowding Out;
Other versions of this item:
- Jonathan P. Thomas & Tim Worrall, 2007. "Unemployment Insurance under Moral Hazard and Limited Commitment: Public versus Private Provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(1), pages 151-181, 02.
- Tim Worall & Jonathan P Thomas, 2005. "Unemployment Insurance under Moral Hazard and Limited Commitment:Public versus Private Provision," 2005 Meeting Papers 158, Society for Economic Dynamics.
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-14 (All new papers)
- NEP-DGE-2004-03-14 (Dynamic General Equilibrium)
- NEP-MIC-2004-03-14 (Microeconomics)
- NEP-PBE-2004-03-14 (Public Economics)
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- Krueger, Dirk & Perri, Fabrizio, 2010.
"Public versus Private Risk Sharing,"
CEPR Discussion Papers
7625, C.E.P.R. Discussion Papers.
- Zhang, Yuzhe, 2012.
"Characterization of a Risk Sharing Contract with One-Sided Commitment,"
42820, University Library of Munich, Germany, revised Aug 2012.
- Zhang, Yuzhe, 2013. "Characterization of a risk sharing contract with one-sided commitment," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 794-809.
- Broer, Tobias, 2011. "Crowding out and crowding in: When does redistribution improve risk-sharing in limited commitment economies?," Journal of Economic Theory, Elsevier, vol. 146(3), pages 957-975, May.
- Broer, Tobias, 2011. "The wrong shape of insurance? What cross-sectional distributions tell us about models of consumption-smoothing," CEPR Discussion Papers 8701, C.E.P.R. Discussion Papers.
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