Does unemployment insurance crowd out home production?

Bulent Guler and Temel Taskin

European Economic Review, 2013, vol. 62, issue C, 1-16

Abstract: In this paper, we study the interaction between self insurance and public insurance. In particular, we provide evidence on a negative correlation between unemployment insurance benefits and home production using the American Time Use Survey (ATUS) and the state-level unemployment insurance data of the U.S. The empirical results suggest that moving to a two times more generous state would decrease time spent on home production about 22% for the unemployed. Then, we pursue a quantitative assessment of this empirical finding using a dynamic competitive equilibrium model in which households do home production as well as market production. The model is able to generate the empirical facts regarding the unemployment benefits and home production. The fact that unemployment insurance benefits crowd out home production is interpreted as a substitution between the two insurance mechanisms against loss of earnings during unemployment spells.

Keywords: Unemployment insurance; Home production; Public insurance; Self insurance; Heterogeneous-agents models (search for similar items in EconPapers)
JEL-codes: D13 E21 J65 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:62:y:2013:i:c:p:1-16

DOI: 10.1016/j.euroecorev.2013.04.006

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