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Efficient Unemployment Insurance Author info | Abstract | Publisher info | Download info | Related research | Statistics Daron Acemoglu
Robert Shimer
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This paper constructs a tractable general equilibrium model of search with risk-aversion. An increase in risk-aversion reduces wages, unemployment, and investment. Unemployment insurance (UI) has the reverse effect due to market generated moral hazard: insured workers seek high wage jobs with high unemployment risk. An economy with risk-neutral workers achieves maximal output without any UI. In contrast, in an economy with risk-averse workers, a positive level of UI maximizes output. Therefore, moderate UI not only improves risk-sharing, but also increases output.
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Date of creation: Aug 1998Date of revision:
Publication status: published as Journal of Political Economy, Vol. 107, no. 5 (1999): 893-928.Handle: RePEc:nbr:nberwo:6686Note: LS PEContact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
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Find related papers by JEL classification: D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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