Self insurance and public employment programs

Sunanda Roy ()
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Sunanda Roy: Drake university

Economics Bulletin, 2007, vol. 4, issue 31, 1-15

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.

JEL-codes: D5 H0 (search for similar items in EconPapers)
Date: 2007-09-03
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