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Efficient Unemployment Insurance

  • Daron Acemoglu
  • Robert Shimer

This paper argues that moderate unemployment insurance not only reduces the uncertainty faced by risk-averse workers but also improves efficiency and raises output. We develop a model in which the decentralized equilibrium is inefficient without unemployment insurance, because the labor market endogenously creates jobs that provide risk-averse workers with low unemployment risk and low wages. Essentially, the labor market offers its own version of insurance.

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File URL: http://dx.doi.org/10.1086/250084
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 107 (1999)
Issue (Month): 5 (October)
Pages: 893-928

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Handle: RePEc:ucp:jpolec:v:107:y:1999:i:5:p:893-928
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  39. Andolfatto, David & Gomme, Paul, 1996. "Unemployment insurance and labor-market activity in Canada," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 47-82, June.
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