Risk aversion does not justify the introduction of mandatory unemployment insurance in the shirking model
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.
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- Holmlund, Bertil, 1998.
" Unemployment Insurance in Theory and Practice,"
Scandinavian Journal of Economics,
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