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16:00 - 17:30 26 November 2014
Who Cares About Unemployment Insurance?
Room B06 |
30 Gordon Street | London | WC1H 0AN | United Kingdom
Ofer Setty, Tel Aviv University
Labor market outcomes demonstrate considerable variation by skill. We construct a general equilibrium model with incomplete markets and ex-ante skill-differences that matches these facts. We study the role of skill-differences in choosing the generosity of Unemployment Insurance (UI) in the model. The optimal replacement rate is 33%, compared to 15% in a model with ex-ante homogeneous workers. This is because of differences in both labor income and unemployment risk: the former creates and incentive to redistribute, while the latter makes redistribution possible. The higher replacement rate is due to the role of UI as a mean of redistribution across types.
Department of Economics - Reception
020 7679 5888
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