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A Positive Theory of Geographic Mobility and Social Insurance

  • John Hassler
  • José Vicente Rodríguez Mora

Evidence suggests that unemployed individuals sometimes can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity arises only for some individuals and the identity of those is unobservable. Unemployment insurance should then be designed to induce individuals to exploit existing opportunities to move or retrain without excessively diminishing the insurance value for the remaining unemployed. This problem has been neglected in previous literature on unemployment insurance design and we show that it may have important consequences. In particular, we derive closed-form solutions, showing that unemployment benefits should increase over the unemployment spell, having an initial period with low benefits and a substantial increase after this period has expired.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 97.

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Date of creation: Sep 2015
Date of revision:
Handle: RePEc:bge:wpaper:97
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  1. DaVanzo, Julie, 1978. "Does Unemployment Affect Migration?-Evidence from Micro Data," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 504-14, November.
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  9. Borjas, George J & Bronars, Stephen G & Trejo, Stephen J, 1992. "Assimilation and the Earnings of Young Internal Migrants," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 170-75, February.
  10. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  11. Hassler, John & Rodriguez Mora, Jose V., 1999. "Employment turnover and the public allocation of unemployment insurance," Journal of Public Economics, Elsevier, vol. 73(1), pages 55-83, July.
  12. Pallage, Stephane & Zimmermann, Christian, 2001. "Voting on Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
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  15. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
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  18. Bartel, Ann P, 1979. "The Migration Decision: What Role Does Job Mobility Play?," American Economic Review, American Economic Association, vol. 69(5), pages 775-86, December.
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