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Unemployment Insurance: Isn't Marriage Enough?

Listed author(s):
  • Stephane Pallage
  • Michel Robe
  • Christian Zimmermann


    (Department of Economics University of Connecticut)

Through marriage, individuals can share some risks that would otherwise be uninsurable. In this paper, we ask how much idiosyncratic income risk can be diversified away through marriage contracts alone versus how much risk there remains for public unemployment insurance programs to alleviate. We tackle this question in a dynamic general equilibrium model with heterogeneous agents and intra-household negociation. Individuals differ in gender, accumulated wealth, as well as employment and marriage status. Marriage, divorce, job acceptance and savings decisions are endogenous. Other labor market outcomes are modelled as an exogenous stochastic process matching key US data. The generosity of the unemployment insurance program is determined by voting. We run a series of experiments to contrast the optimal public insurance schemes in worlds with and without marriage possibilities. The impact of moral hazard in the employment market is assessed.

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 697.

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Date of creation: 03 Dec 2006
Handle: RePEc:red:sed006:697
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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