Unemployment Insurance and Precautionary Savings: Transitional Dynamics vs. Steady State Equilibrium
JOSEPH Gilles and WEITZENBLUM Thomas
Authors registered in the RePEc Author Service: Thomas Weitzenblum ()
No 96, Computing in Economics and Finance 2001 from Society for Computational Economics
In this study, we ask whether the presence of precautionary savings substantially reduces the optimal replacement rate in an economy characterized by equilibrium unemployment and moral hazard. In line with previous studies, the optimality criterion based on comparisons of steady states leads to a low optimal ratio. Yet, this result ignores potential transitional costs due to the necessity for agents to increase their savings and reduce their consumption whenever the ratio is cut. We therefore build a dynamic model taking full account of the transition, and show that steady state optimality is not robust to transitional costs.
Keywords: equilibrium unemployment; job search; moral hazard; precautionary savings; unemployment insurance (search for similar items in EconPapers)
JEL-codes: J64 D31 C61 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf1:96
Access Statistics for this paper
More papers in Computing in Economics and Finance 2001 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().