Productivity Gains from Unemployment Insurance

Daron Acemoglu and Robert Shimer

No 7352, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs, and by encouraging firms to create those jobs. We use a quantitative general equilibrium model to investigate whether this effect is comparable in magnitude to the standard moral hazard effects of unemployment insurance. Our model economy captures the behavior of the U.S. labor market for high school graduates quite well. When unemployment insurance becomes more generous starting from the current U.S. levels, there is an increase in unemployment similar in magnitude to the micro-estimates, but because the composition of jobs also changes, total output and welfare increase as well.

JEL-codes: E24 J64 (search for similar items in EconPapers)
Date: 1999-09
New Economics Papers: this item is included in nep-ias, nep-lab, nep-pbe and nep-pub
Note: LS PE EFG
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Citations: View citations in EconPapers (12)

Published as Acemoglu, Daron and Robert Shimer. "Productivity Gains From Unemployment Insurance," European Economic Review, 2000, v44(7,Jun), 1195-1224.

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Journal Article: Productivity gains from unemployment insurance (2000)
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