EconPapers    
Economics at your fingertips  
 

Equilibrium unemployment insurance

John Hassler (), Sevi Rodríguez Mora (), Kjetil Storesletten () and Fabrizio Zilibotti ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper, we incorporate a positive theory of unemployment 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 across agents, may choose very different unemployment insurance levels in 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 whichmay 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 U.S. and Europe, respectively.

Keywords: Comparative advantege; employment; political equilibrium; search; specialization; unemployment insurance (search for similar items in EconPapers)
JEL-codes: D72 E24 J24 J64 J65 (search for similar items in EconPapers)
Date: 1998-04, Revised 1999-06
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
https://econ-papers.upf.edu/papers/605.pdf Whole Paper (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:upf:upfgen:605

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ().

 
Page updated 2020-09-15
Handle: RePEc:upf:upfgen:605