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Optimal social insurance, incentives, and transition

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  • Andrew Atkeson
  • Patrick J. Kehoe

Abstract

We study transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty. When there are incentive problems in this rematching process, the optimal scheme may involve forced layoffs, involuntary unemployment, and a recession.

Suggested Citation

  • Andrew Atkeson & Patrick J. Kehoe, 1995. "Optimal social insurance, incentives, and transition," Working Papers 546, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:546
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    References listed on IDEAS

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    1. Ed Nosal & Richard Rogerson & Randall Wright, 1992. "The Role of Household Production in Models of Involuntary Unemployment and Underemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 507-520, August.
    2. Philippe Aghion & Olivier J. Blanchard, 1994. "On the Speed of Transition in Central Europe," NBER Chapters,in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330 National Bureau of Economic Research, Inc.
    3. Kahn, Charles M. & Green, Jerry, 1983. "Wage-Employment Contracts," Scholarly Articles 3203642, Harvard University Department of Economics.
    4. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827, December.
    5. Calvo, Guillermo A & Coricelli, Fabrizio, 1992. "Stagflationary Effects of Stabilization Programs in Reforming Socialist Countries: Enterprise-Side and Household-Side Factors," World Bank Economic Review, World Bank Group, vol. 6(1), pages 71-90, January.
    6. Rogerson, Richard, 1987. "An Equilibrium Model of Sectoral Reallocation," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 824-834, August.
    7. Philippe Aghion & Olivier Jean Blanchard, 1994. "On the Speed of Transition Central Europe," NBER Working Papers 4736, National Bureau of Economic Research, Inc.
    8. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
    9. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    10. Dixit, Avinash & Rob, Rafael, 1994. "Risk-sharing, adjustment, and trade," Journal of International Economics, Elsevier, vol. 36(3-4), pages 263-287, May.
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    Cited by:

    1. Atkeson, Andrew & Kehoe, Patrick J, 1996. "Social Insurance and Transition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 377-401, May.

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    Keywords

    Employment (Economic theory);

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