Self Insurance and Public Employment Programs

Sunanda Roy

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: The paper studies the labor allocation decision by households faced with non-insurable labor income risks and establishes a case for a government sponsored public employment program as a provider of self-insurance to such households. We study the equilibria of a two period general equilibrium model with incomplete markets and two types of firms - a privately owned one offering a risky wage contract and a public works program offering a relatively riskfree one. We show that the employment level in the public program is higher in our model economy compared to that in a benchmark complete markets economy.

Date: 2007-09-03
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Published in Economics Bulletin 2007, vol. 4 no. 31

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13105

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