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Understanding the welfare effects of unemployment insurance policy in general equilibrium

  • Mukoyama, Toshihiko

This paper analyzes the welfare effects of unemployment insurance reforms in a general equilibrium incomplete market model. In particular, it decomposes the total welfare effect for each individual into different factors. I consider a model where the consumers face an uninsurable unemployment risk, can save in an interest-bearing asset, and are subject to a borrowing constraint. The labor market is modeled using a Diamond–Mortensen–Pissarides style search and matching model. The decomposition exercises reveal how each factor contributes to the heterogeneity of welfare effects among different consumers.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 38 (2013)
Issue (Month): PB ()
Pages: 347-368

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Handle: RePEc:eee:jmacro:v:38:y:2013:i:pb:p:347-368
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  21. Toshihiko Mukoyama & Aysegül Sahin, 2004. "Why did the average duration of unemployment become so much longer?," Staff Reports 194, Federal Reserve Bank of New York.
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  25. Atila Abdulkadiroglu & Burhanettin Kuruscu & Aysegul Sahin, 2002. "Unemployment Insurance and the Role of Self-Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 681-703, July.
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  28. Reichling, Felix, 2006. "Optimal Unemployment Insurance in Labor Market Equilibrium when Workers can Self-Insure," MPRA Paper 5362, University Library of Munich, Germany, revised 16 Oct 2007.
  29. Rune Vejlin, 2011. "Optimal Unemployment Insurance: How Important is the Demand Side?," Economics Working Papers 2011-03, Department of Economics and Business Economics, Aarhus University.
  30. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers 243, Department of Economics and Business, Universitat Pompeu Fabra.
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