Unemployment Insurance with Moral Hazard in a Dynamic Economy

Stephen Williamson () and Cheng Wang
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Cheng Wang: Iowa City, IA 52242

Macroeconomics from EconWPA

Abstract: We study a dynamic model with positive gross flows between employment and unemployment. There is moral hazard associated with search effort and job-retention effort. A quantitative comparison of the unemployment insurance system currently in place in the United States with an optimal system shows that the optimal system reduces the steady state unemployment rate by 3.40 percentage points and increases output by 3.64\%. The optimal system involves a large subsidy for a transition from unemployment to employment and a large penalty for a transition from employment to unemployment.

JEL-codes: E (search for similar items in EconPapers)
Date: 1995-06-15
Note: Zipped using PKZIP v2.04, encoded using uuencode v5.15. Zipped file includes 1 file -- cheng (body in TeX format) Macros included
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Related works:
Working Paper: Unemployment Insurance with Moral Hazard in a Dynamic Economy (1995)
Working Paper: Unemployment Insurance with Moral Hazard in a Dynamic Economy (1995)
Journal Article: Unemployment insurance with moral hazard in a dynamic economy (1996)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:9506002

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