Optimal Life Cycle Unemployment Insurance

Claudio Michelacci () and Hernán Ruffo

No 10167, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers.

Keywords: Insurance; Search; Unemployment (search for similar items in EconPapers)
JEL-codes: E24 H21 J64 J65 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-age, nep-dge, nep-ias, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Optimal Life Cycle Unemployment Insurance (2015)
Working Paper: Optimal Life Cycle Unemployment Insurance (2014)
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