Effciency and Equality in a Simple Model of Unemployment Insurance
This paper describes the efficient allocation of consumption and work effort in an economy in which workers face idiosyncratic employment risk and considerations of moral hazard prevent full insurance. We impose a lower bound on the expected discounted utility that can be assigned to any agent from any date onward, and show, with this feature added, that the efficient unemployment insurance scheme induces an invariant cross sectional distribution of individual entitlements to utility. The paper thus provides a simple prototype model suited to the study of the normative question: what is the tradeoff between equality and efficiency in resource allocation?
|Date of creation:||Jun 1993|
|Date of revision:|
|Publication status:||published as Journal of Economic Theory, Vol. 66, no. 1 (June 1995): 64-88.|
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- Hansen, Gary D & Imrohoroglu, Ayse, 1992.
"The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard,"
Journal of Political Economy,
University of Chicago Press, vol. 100(1), pages 118-42, February.
- Gary D. Hansen & Ayse Imrohoroglu, 1990. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," UCLA Economics Working Papers 583, UCLA Department of Economics.
- Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
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Levine's Working Paper Archive
2179, David K. Levine.
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"An Equilibrium Model of Search Unemployment,"
83-10, C.V. Starr Center for Applied Economics, New York University.
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- Thomas, Jonathan & Worrall, Tim, 1990. "Income fluctuation and asymmetric information: An example of a repeated principal-agent problem," Journal of Economic Theory, Elsevier, vol. 51(2), pages 367-390, August.
- Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September.
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