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.
|Date of creation:||09 Aug 2005|
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- 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, 06.
- Acemoglu, D. & Shimer, R., 1997.
"Efficient Unemployment Insurance,"
97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
- Holmlund, B., 1997.
"Unemployment Insurance in Theory and Practice,"
CEPR Discussion Papers
380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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