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Unemployment Insurance Generosity and Self-Employment

Author

Listed:
  • Alexandre Gaillard

    (Brown University)

  • Sumudu Kankanamge

    (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, IRA - Institut du Risque et de l'Assurance, Le Mans)

Abstract

We show that more generous unemployment insurance (UI) reduces self-employment, with an elasticity twice as negative as the job search disincentive. This results in a sizable decline in aggregate self-employment. Using a structural model of the U.S. labor market, we trace this negative response to two features of UI policy: the exclusion of the self-employed from UI coverage and job search monitoring for UI recipients. The model predicts that neutralizing monitoring requirements and allowing the self-employed to gain UI coverage over time dampen the negative impact of increased UI generosity on self-employment, but also reduce the employment rate.

Suggested Citation

  • Alexandre Gaillard & Sumudu Kankanamge, 2025. "Unemployment Insurance Generosity and Self-Employment," Working Papers hal-05398346, HAL.
    • Handle: RePEc:hal:wpaper:hal-05398346
    Note: View the original document on HAL open archive server: https://hal.science/hal-05398346v1
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