Unemployment Insurance: Risk Sharing Versus Efficiency
Two models of spot labor markets are presented in which labor suppliers have heterogeneous attitudes towards effort and in which uncertainty prevails on labor productivity and growth. The problem of selecting efficient rules to manage unemployment insurance (UI) systems is considered. We show that there does not exist any system which combines an efficient allocation of labor with an efficient allocation of risks among employees, unemployed workers and capital-owners. Pareto-efficient policy rules are a best compromise between these two conflicting objectives. It implies that productive efficiency could be improved in periods of mass unemployment by reducing UI benefits. That would be at the expense of more inefficiencies in the sharing of macroeconomic risks. At the optimum, the UI benefit is positively correlated to growth and it is negatively correlated to labor productivity. The Geneva Papers on Risk and Insurance Theory (1991) 16, 59–74. doi:10.1007/BF00942857
Year of publication: |
1991
|
---|---|
Authors: | Gollier, Christian |
Published in: |
The Geneva Risk and Insurance Review. - Palgrave Macmillan, ISSN 1554-964X. - Vol. 16.1991, 1, p. 59-74
|
Publisher: |
Palgrave Macmillan |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Optimal choice and beliefs with ex ante savoring and ex post disappointment
Gollier, Christian, (2006)
-
Should We Discount the Far-Distant Future at Its Lowest Possible Rate?
Gollier, Christian, (2009)
-
Should we Discount the Far-Distant Future at its Lowest Possible Rate?
Gollier, Christian, (2009)
- More ...