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Risk aversion does not justify the introduction of mandatory unemployment insurance in the shirking model

Author

Listed:
  • Julia Fath
  • Clemens Fuest

Abstract

The introduction of unemployment insurance is usually thought to increase welfare if workers are sufficiently risk averse. We analyse the effects of introducing mandatory unemployment insurance in the shirking model. Surprisingly, we find that introducing unemployment insurance reduces welfare irrespective of the degree of risk aversion.

Suggested Citation

  • Julia Fath & Clemens Fuest, 2005. "Risk aversion does not justify the introduction of mandatory unemployment insurance in the shirking model," Working Paper Series in Economics 19, University of Cologne, Department of Economics.
  • Handle: RePEc:kls:series:0019
    as

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    File URL: http://ockenfels.uni-koeln.de/fileadmin/wiso_fak/stawi-ockenfels/pdf/wp_series_download/wp0019.pdf
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    References listed on IDEAS

    as
    1. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-141, March.
    2. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    3. Julia Fath & Clemens Fuest, 2005. "Experience Rating versus Employment Protection Laws in a Model where Firms Monitor Workers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 299-314, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Efficiency Wages; Shirking; Unemployment Insurance;

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H1 - Public Economics - - Structure and Scope of Government

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