-aversion reduces wages, unemployment, and investment. Unemployment insurance (UI) has the reverse effect due to market generated moral … hazard: insured workers seek high wage jobs with high unemployment risk. An economy with risk-neutral workers achieves …

-aversion reduces wages, unemployment, and investment. Unemployment insurance (UI) has the reverse effect due to market generated moral … hazard: insured workers seek high wage jobs with high unemployment risk. An economy with risk-neutral workers achieves …

reduces wages, unemployment, and investment. Unemployment insurance has the opposite effect: insured workers seek high …-wage jobs with high unemployment risk. An economy with risk-neutral workers achieves maximal output without any unemployment … insurance, but an economy with risk-averse workers requires a positive level of unemployment insurance to maximize output …

This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher … 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 …