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Does Unemployment Insurance Crowd out Home Production?

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  • Bulent Guler
  • Temel Taskin

Abstract

In this paper, we study the interaction between self insurance and public insurance. In particular, we provide evidence on a negative correlation between unemployment insurance benefits and home production using the American Time Use Survey (ATUS) and the state-level unemployment insurance data of the U.S. The empirical results suggest that moving to a two times more generous state would decrease time spent on home production about 22% for the unemployed. Then, we pursue a quantitative assessment of this empirical finding using a dynamic competitive equilibrium model in which households do home production as well as market production. The model is able to generate the empirical facts regarding the unemployment benefits and home production. The fact that unemployment insurance benefits crowd out home production is interpreted as a substitution between the two insurance mechanisms against loss of earnings during unemployment spells.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1323.

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Date of creation: 2013
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Handle: RePEc:tcb:wpaper:1323

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Keywords: Unemployment insurance; home production; public insurance; self insurance; heterogeneous-agents models;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Hone production vs. unemployment insurance
    by Economic Logician in Economic Logic on 2013-06-26 14:48:00

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