IDEAS home Printed from https://ideas.repec.org/p/tcb/wpaper/1323.html
   My bibliography  Save this paper

Does Unemployment Insurance Crowd out Home Production?

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2013/13-23
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Greenwood, Jeremy & Hercowitz, Zvi, 1991. "The Allocation of Capital and Time over the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1188-1214, December.
    2. Marcet, Albert & Obiols-Homs, Francesc & Weil, Philippe, 2007. "Incomplete markets, labor supply and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2621-2635, November.
    3. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-782, July.
    4. Krueger, Alan B. & Mueller, Andreas, 2010. "Job search and unemployment insurance: New evidence from time use data," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 298-307, April.
    5. Nakajima, Makoto, 2012. "A quantitative analysis of unemployment benefit extensions," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 686-702.
    6. Hamish Low & Costas Meghir & Luigi Pistaferri, 2010. "Wage Risk and Employment Risk over the Life Cycle," American Economic Review, American Economic Association, vol. 100(4), pages 1432-1467, September.
    7. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    8. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
    9. Yongsung Chang & Andreas Hornstein, 2006. "Home production," Working Paper 06-04, Federal Reserve Bank of Richmond.
    10. 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 118-142, February.
    11. Ortigueira, Salvador & Siassi, Nawid, 2013. "How important is intra-household risk sharing for savings and labor supply?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 650-666.
    12. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    13. Alan B. Krueger & Andreas I. Mueller, 2012. "The Lot Of The Unemployed: A Time Use Perspective," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 765-794, August.
    14. Cutler, David M & Gruber, Jonathan, 1996. "The Effect of Medicaid Expansions on Public Insurance, Private Insurance, and Redistribution," American Economic Review, American Economic Association, vol. 86(2), pages 378-383, May.
    15. Burda, Michael C. & Hamermesh, Daniel S., 2010. "Unemployment, market work and household production," Economics Letters, Elsevier, vol. 107(2), pages 131-133, May.
    16. Mark A. Aguiar & Erik Hurst & Loukas Karabarbounis, 2011. "Time Use During Recessions," NBER Working Papers 17259, National Bureau of Economic Research, Inc.
    17. Mark Aguiar & Erik Hurst, 2007. "Life-Cycle Prices and Production," American Economic Review, American Economic Association, vol. 97(5), pages 1533-1559, December.
    18. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
    19. Finkelstein, Amy, 2004. "The interaction of partial public insurance programs and residual private insurance markets: evidence from the US Medicare program," Journal of Health Economics, Elsevier, vol. 23(1), pages 1-24, January.
    20. Miki Kohara, 2010. "The response of Japanese wives’ labor supply to husbands’ job loss," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(4), pages 1133-1149, September.
    21. Engen, Eric M. & Gruber, Jonathan, 2001. "Unemployment insurance and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 545-579, June.
    22. Anderson, Patricia M & Meyer, Bruce D, 1993. "Unemployment Insurance in the United States: Layoff Incentives and Cross Subsidies," Journal of Labor Economics, University of Chicago Press, vol. 11(1), pages 70-95, January.
    23. Canova, Fabio & Ubide, Angel J., 1998. "International business cycles, financial markets and household production," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 545-572, April.
    24. Mikhail Golosov & Aleh Tsyvinski, 2007. "Optimal Taxation with Endogenous Insurance Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 487-534.
    25. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    26. Raj Chetty & Emmanuel Saez, 2010. "Optimal Taxation and Social Insurance with Endogenous Private Insurance," NBER Chapters, in: Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES), pages 85-114, National Bureau of Economic Research, Inc.
    27. David M. Cutler & Jonathan Gruber, 1996. "Does Public Insurance Crowd out Private Insurance?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 391-430.
    28. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
    29. Temel Taskin, 2010. "Unemployment Insurance and Home Production," 2010 Meeting Papers 93, Society for Economic Dynamics.
    30. Patricia M. Anderson & Bruce D. Meyer, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 913-937.
    31. Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
    32. Carole Roan Gresenz & Sarah E. Edgington & Miriam J. Laugesen & José J. Escarce, 2011. "Take-Up of Public Insurance and Crowd-out of Private Insurance Under Recent CHIP Expansions to Higher Income Children," NBER Working Papers 17658, National Bureau of Economic Research, Inc.
    33. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
    34. Cullen, Julie Berry & Gruber, Jonathan, 2000. "Does Unemployment Insurance Crowd Out Spousal Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 546-572, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jim Been & Susann Rohwedder & Michael Hurd, 2020. "Does Home Production Replace Consumption Spending? Evidence from Shocks in Housing Wealth in the Great Recession," The Review of Economics and Statistics, MIT Press, vol. 102(1), pages 113-128, March.
    2. Marius Clemens & Guillaume Claveres, 2017. "Unemployment Insurance Union," 2017 Meeting Papers 1340, Society for Economic Dynamics.
    3. Dotsey, Michael & Li, Wenli & Yang, Fang, 2015. "Home production and Social Security reform," European Economic Review, Elsevier, vol. 73(C), pages 131-150.
    4. 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.
    5. Fehr, Hans & Kallweit, Manuel & Kindermann, Fabian, 2017. "Families and social security," European Economic Review, Elsevier, vol. 91(C), pages 30-56.
    6. Benjamin Bridgman, 2016. "Engines of Leisure," BEA Working Papers 0137, Bureau of Economic Analysis.
    7. Sean Hundtofte & Arna Olafsson & Michaela Pagel, 2019. "Credit Smoothing," NBER Working Papers 26354, National Bureau of Economic Research, Inc.
    8. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hrv:faseco:34330197 is not listed on IDEAS
    2. Ortigueira, Salvador & Siassi, Nawid, 2013. "How important is intra-household risk sharing for savings and labor supply?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 650-666.
    3. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    4. Raj Chetty & Emmanuel Saez, 2010. "Optimal Taxation and Social Insurance with Endogenous Private Insurance," NBER Chapters, in: Income Taxation, Trans-Atlantic Public Economics Seminar (TAPES), pages 85-114, National Bureau of Economic Research, Inc.
    5. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    6. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    7. Serdar Birinci & Kurt Gerrard See, 2018. "How Should Unemployment Insurance vary over the Business Cycle?," 2018 Meeting Papers 69, Society for Economic Dynamics.
    8. Raj Chetty, 2004. "Optimal Unemployment Insurance When Income Effects are Large," NBER Working Papers 10500, National Bureau of Economic Research, Inc.
    9. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
    10. Reichling, Felix, 2006. "Optimal Unemployment Insurance in Labor Market Equilibrium when Workers can Self-Insure," MPRA Paper 5362, University Library of Munich, Germany, revised 16 Oct 2007.
    11. Bruce D. Meyer & Wallace K. C. Mok, 2007. "Quasi-Experimental Evidence on the Effects of Unemployment Insurance from New York State," NBER Working Papers 12865, National Bureau of Economic Research, Inc.
    12. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
    13. Campos, Rodolfo G. & Reggio, Iliana, 2016. "Optimal unemployment insurance: Consumption versus expenditure," Labour Economics, Elsevier, vol. 38(C), pages 81-89.
    14. Pauline Leung & Christopher J. O'Leary, 2015. "Should UI Eligibility Be Expanded to Low-Earning Workers? Evidence on Employment, Transfer Receipt, and Income from Administrative Data," Upjohn Working Papers and Journal Articles 15-236, W.E. Upjohn Institute for Employment Research.
    15. Walter Nicholson & Karen Needels, "undated". "The EUC08 Program in Theoretical and Historical Perspective," Mathematica Policy Research Reports 9046cb11c3aa44c8a036a6e38, Mathematica Policy Research.
    16. Aguiar, M. & Hurst, E., 2016. "The Macroeconomics of Time Allocation," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 203-253, Elsevier.
    17. Michael Dotsey & Wenli Li & Fang Yang, 2014. "Consumption And Time Use Over The Life Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 665-692, August.
    18. Serdar Birinci & Kurt See, 2019. "Labor Market Responses to Unemployment Insurance: The Role of Heterogeneity," Working Papers 2019-022, Federal Reserve Bank of St. Louis, revised Mar 2021.
    19. Thomas Crossley & Hamish Low, 2004. "When Might Unemployment Insurance Matter?," Department of Economics Working Papers 2004-04, McMaster University.
    20. Walter Nicholson & Karen Needels & Heinrich Hock, 2014. "Unemployment Compensation During the Great Recession: Theory and Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 187-218, March.
    21. Temel Taskin, 2010. "Unemployment Insurance and Home Production," 2010 Meeting Papers 93, Society for Economic Dynamics.

    More about this item

    Keywords

    Unemployment insurance; home production; public insurance; self insurance; heterogeneous-agents models;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tcb:wpaper:1323. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/tcmgvtr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sermet Pekin or Ilker Cakar or (email available below). General contact details of provider: https://edirc.repec.org/data/tcmgvtr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.