Risk aversion does not justify the introduction of mandatory unemployment insurance in the shirking model

Julia Fath and Clemens Fuest

No 19, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: The introduction of unemployment insurance is usually thought to increase welfare if workers are sufficiently risk averse. We analyse the effects of introducing mandatory unemployment insurance in the shirking model. Surprisingly, we find that introducing unemployment insurance reduces welfare irrespective of the degree of risk aversion.

Keywords: Efficiency Wages; Shirking; Unemployment Insurance (search for similar items in EconPapers)
JEL-codes: H1 J0 J3 (search for similar items in EconPapers)
Date: 2005-08-09
New Economics Papers: this item is included in nep-dge and nep-lab
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Citations: View citations in EconPapers (2)

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