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Unemployment insurance in a sticky-price model with worker moral hazard

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  • Givens, Gregory E.

Abstract

This paper studies the role of unemployment insurance in a sticky-price model that features an efficiency-wage view of the labor market based on unobservable effort. The risk-sharing mechanism central to the model permits, but does not force, agents to be fully insured. Structural parameters are estimated using a maximum-likelihood procedure on US data. Formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk. The results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 35 (2011)
Issue (Month): 8 (August)
Pages: 1192-1214

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Handle: RePEc:eee:dyncon:v:35:y:2011:i:8:p:1192-1214
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

Keywords: Unemployment Partial insurance Efficiency wages Sticky prices;

Other versions of this item:

Find related papers by JEL classification:
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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Cited by:

  1. Pospelov Igor & Radionov Stanislav, 2015. "On the Social Efficiency in Monopolistic Competition Models," Экономический журнал Высшей школы экономики Higher School of Economics Economic Journal, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 19(3), pages 386–394.
  2. Robert Jump, 2014. "A Fair Wage Explanation of Labour Market Volatility," Studies in Economics 1413, School of Economics, University of Kent.

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