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Optimal Unemployment Insurance and Voting

  • Andreas Pollak

    (University of Freiburg)

The framework of a general equilibrium heterogeneous agent model is used to study the optimal design of an unemployment insurance (UI) scheme and the voting behaviour on unemployment policy reforms. In a first step, the optimal defined benefit and defined replacement ratio UI systems are obtained in simulations. Then, the question whether switching to such an optimal system from the status quo would be approved by a majority of the voters is explored. Finally, the transitional dynamics following a policy change are analysed. Accounting for this transition has an important influence on the voting outcome.

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Paper provided by EconWPA in its series Computational Economics with number 0505002.

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Length: 35 pages
Date of creation: 12 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpco:0505002
Note: Type of Document - pdf; pages: 35
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  1. Stephane Pallage & Christian Zimmermann, 2004. "On Voters' Attitudes Towards Unemployment Insurance Subsidies across Regions: A Canadian Simulation," Working papers 2004-34, University of Connecticut, Department of Economics.
  2. Burkhard Heer, 2000. "Employment and Welfare Effects of a Two-Tier Unemployment Compensation System," CESifo Working Paper Series 297, CESifo Group Munich.
  3. repec:tpr:qjecon:v:109:y:1994:i:3:p:659-84 is not listed on IDEAS
  4. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  5. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
  6. 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.
  7. Pallage, Stephane & Zimmermann, Christian, 2001. "Voting on Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
  8. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
  9. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
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