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Unemployment Insurance: Isn't Marriage Enough?

Author

Listed:
  • Stephane Pallage
  • Michel Robe
  • Christian Zimmermann

    (Department of Economics University of Connecticut)

Abstract

Through marriage, individuals can share some risks that would otherwise be uninsurable. In this paper, we ask how much idiosyncratic income risk can be diversified away through marriage contracts alone versus how much risk there remains for public unemployment insurance programs to alleviate. We tackle this question in a dynamic general equilibrium model with heterogeneous agents and intra-household negociation. Individuals differ in gender, accumulated wealth, as well as employment and marriage status. Marriage, divorce, job acceptance and savings decisions are endogenous. Other labor market outcomes are modelled as an exogenous stochastic process matching key US data. The generosity of the unemployment insurance program is determined by voting. We run a series of experiments to contrast the optimal public insurance schemes in worlds with and without marriage possibilities. The impact of moral hazard in the employment market is assessed.

Suggested Citation

  • Stephane Pallage & Michel Robe & Christian Zimmermann, 2006. "Unemployment Insurance: Isn't Marriage Enough?," 2006 Meeting Papers 697, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:697
    as

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    More about this item

    Keywords

    marriage; unemployment insurance; incomplete markets; moral hazard; intra-household negociation;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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