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Moral hazard, optimal unemployment insurance, and experience rating

  • Wang, Cheng
  • Williamson, Stephen D.

This paper is concerned with evaluating alternative unemployment insurance (UI) schemes in a dynamic economy with moral hazard. We consider changes in the size and duration of UI benefits, and the effects of experience rating, and use a dynamic contracting approach to determine a benchmark optimal allocation. Radical changes in the current UI system increase welfare, but not by much. A move to full experience rating has distributional effects, but the aggregate effects are negligible.

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File URL: http://www.sciencedirect.com/science/article/B6VBW-46VBMG4-2/2/7c69a6611e96e613e98a136a63770fef
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 7 (October)
Pages: 1337-1371

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Handle: RePEc:eee:moneco:v:49:y:2002:i:7:p:1337-1371
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  8. Wang, Cheng & Williamson, Steve, 1996. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Staff General Research Papers 5088, Iowa State University, Department of Economics.
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