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Moral Hazard, Optimal Unemployment Insurance and Experience Rating

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  • Wang, Cheng
  • Williamson, Stephen D.

Abstract

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.

Suggested Citation

  • Wang, Cheng & Williamson, Stephen D., 2002. "Moral Hazard, Optimal Unemployment Insurance and Experience Rating," Staff General Research Papers Archive 10133, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:10133
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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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