Efficient Unemployment Insurance

Daron Acemoglu and Robert Shimer

Working papers from Massachusetts Institute of Technology (MIT), Department of Economics

Abstract: This paper argues that moderate unemployment insurance not only reduces the uncertainty faced by risk-averse workers but also improves efficiency and raises output. We develop a model in which the decentralized equilibrium is inefficient without unemployment insurance, because the labor market endogenously creates jobs that provide risk-averse workers with low unemployment risk and low wages. Essentially, the labor market offers its own version of insurance.

Keywords: EFFICIENCY; WAGES; UNEMPLOYMENT; RISK (search for similar items in EconPapers)
JEL-codes: D83 J64 J65 (search for similar items in EconPapers)
Pages: 37 pages
Date: 1997
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Citations: View citations in EconPapers (17)

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Journal Article: Efficient Unemployment Insurance (1999)
Working Paper: Efficient Unemployment Insurance (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:mit:worpap:97-9

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