EconPapers    
Economics at your fingertips  
 

Equilibrium Unemployment Insurance

John Hassler (), José Mora (), Kjetil Storesletten () and Fabrizio Zilibotti ()
Additional contact information
José Mora: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

No 665, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: In this paper, we introduce a positive theory of unemployement insurance into a dynamic overlapping generations model with search-matching frictions and on-the-job learning-by-doing. The model shows that societies populated by identical rational agents, but differing in the initial distribution of human capital accross agents, may choose very different unemployment insurance levels into a politico-economic equilibrium. The interaction between the political decision about the level of the unemployment insurance and the optimal search behavior of the unemployed gives rise to a self-reinforcing mechanism which may generate multiple steady-state equilibria. In particular, a European-type steady-state with high unemployment, low employment turnover and high insurance can co-exist with an American-type steady state with low unemployment, high employment turnover and low unemployment insurance. A calibrated version of the model features two distinct steady-state equilibria with unemployment levels and duration rates resembling those of the US and Europe respectively.

Keywords: Comparative Advatage; Employment; Political Equilibrium; Search; Specialization; Unemployment Insurance (search for similar items in EconPapers)
JEL-codes: D72 E21 E24 J21 J24 J31 J64 J65 (search for similar items in EconPapers)
Pages: 55 pages
Date: 1999-01-28
New Economics Papers: this item is included in nep-dge, nep-lab, nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://su.diva-portal.org/smash/get/diva2:328271/FULLTEXT01 (application/pdf)

Related works:
Working Paper: Equilibrium Unemployment Insurance (1999) Downloads
Working Paper: Equilibrium Unemployment Insurance (1999)
Working Paper: Equilibrium unemployment insurance (1999) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0665

Access Statistics for this paper

More papers in Seminar Papers from Stockholm University, Institute for International Economic Studies Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Hanna Christiansson ().

 
Page updated 2020-07-25
Handle: RePEc:hhs:iiessp:0665