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Optimal Life Cycle Unemployment Insurance

Claudio Michelacci () and Hernán Ruffo ()

American Economic Review, 2015, vol. 105, issue 2, 816-59

Abstract: We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers. (JEL D91, E24, J13, J64, J65)

JEL-codes: D91 E24 J13 J64 J65 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20111559
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Working Paper: Optimal Life Cycle Unemployment Insurance (2014) Downloads
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