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Does Unemployment Insurance Crowd out Home Production?

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  • Bulent Guler
  • Temel Taskin

Abstract

In this paper, we study the interaction between self insurance and public insurance. In particular, we provide evidence on a negative correlation between unemployment insurance benefits and home production using the American Time Use Survey (ATUS) and the state-level unemployment insurance data of the U.S. The empirical results suggest that moving to a two times more generous state would decrease time spent on home production about 22% for the unemployed. Then, we pursue a quantitative assessment of this empirical finding using a dynamic competitive equilibrium model in which households do home production as well as market production. The model is able to generate the empirical facts regarding the unemployment benefits and home production. The fact that unemployment insurance benefits crowd out home production is interpreted as a substitution between the two insurance mechanisms against loss of earnings during unemployment spells.

Suggested Citation

  • Bulent Guler & Temel Taskin, 2013. "Does Unemployment Insurance Crowd out Home Production?," Working Papers 1323, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1323
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Hone production vs. unemployment insurance
      by Economic Logician in Economic Logic on 2013-06-26 19:48:00

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    Cited by:

    1. Benjamin Bridgman, 2016. "Engines of Leisure," BEA Working Papers 0137, Bureau of Economic Analysis.
    2. Dotsey, Michael & Li, Wenli & Yang, Fang, 2015. "Home production and Social Security reform," European Economic Review, Elsevier, vol. 73(C), pages 131-150.
    3. Scott Ross Baker & Contantine Yannelis, 2017. "Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 99-124, January.
    4. Fehr, Hans & Kallweit, Manuel & Kindermann, Fabian, 2017. "Families and social security," European Economic Review, Elsevier, vol. 91(C), pages 30-56.
    5. Marius Clemens & Guillaume Claveres, 2017. "Unemployment Insurance Union," 2017 Meeting Papers 1340, Society for Economic Dynamics.
    6. Marcelo Arbex & Flavia Chein & Isabela Furtado & Enlinson Mattos, 2017. "Publicly Provided Private Goods and Informal Labor Supply," Working Papers 1710, University of Windsor, Department of Economics.

    More about this item

    Keywords

    Unemployment insurance; home production; public insurance; self insurance; heterogeneous-agents models;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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