Unemployment Insurance Under Moral Hazard and Limited Commitment: Public Versus Private Provision

31 Pages Posted: 11 Dec 2007

See all articles by Jonathan P. Thomas

Jonathan P. Thomas

affiliation not provided to SSRN

Tim S. Worrall

University of Edinburgh

Date Written: 2006-06-28

Abstract

This paper analyzes a model of private unemployment insurance under limited commitment and a model of public unemployment insurance subject to moral hazard in an economy with a continuum of agents and an infinite time horizon. The dynamic and steady-state properties of the optimum private unemployment insurance scheme are established. The interaction between public and private unemployment insurance schemes is examined. Examples are constructed to show that for some parameter values increased public insurance can reduce welfare by crowding out private insurance more than one-to-one and that for other parameter values a mix of both public and private insurance can be welfare maximizing.

Suggested Citation

Thomas, Jonathan P. and Worrall, Tim S., Unemployment Insurance Under Moral Hazard and Limited Commitment: Public Versus Private Provision (2006-06-28). Journal of Public Economic Theory, Vol. 9, Issue 1, pp. 151-181, February 2007, Available at SSRN: https://ssrn.com/abstract=1066055 or http://dx.doi.org/10.1111/j.1467-9779.2007.00302.x

Jonathan P. Thomas

affiliation not provided to SSRN

No Address Available

Tim S. Worrall (Contact Author)

University of Edinburgh ( email )

30 Buccleuch Place
Edinburgh, Scotland EH8 9JY
United Kingdom
(0)131 651 5128 (Phone)

HOME PAGE: http://www.timworrall.com

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