Unemployment Insurance under Moral Hazard and Limited Commitment: Public vs Private Provision

Jonathan Thomas () and Tim Worrall ()

No KERP 2002/20, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: This paper analyses a model of private unemployment insurance under limited commitment and a model of public unemployment insurance subject to moral hazard in an economy with a continuum of agents and an infinite time horizon. The dynamic and steady-state properties of the private unemployment insurance scheme are established. The interaction between the public and private unemployment insurance schemes is examined. Examples are constructed to show that for some parameter values increased public insurance can reduce welfare by crowding out private insurance more than one-to-one and that for other parameter values a mix of both public and private insurance can be welfare maximising.

Keywords: Social Insurance; Moral Hazard; Limited Commitment; Unemployment Insurance; Crowding Out (search for similar items in EconPapers)
JEL-codes: D61 H31 H55 J65 (search for similar items in EconPapers)
Date: Written
Note: Originally titled ‘‘Social Insurance and Crowding Out’’.
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Working Paper: Unemployment Insurance under Moral Hazard and Limited Commitment: Public vs Private Provision (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:kee:kerpuk:2002/20

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