Productivity Gains from Unemployment Insurance
38 Pages Posted: 26 Jul 2000
There are 2 versions of this paper
Productivity Gains from Unemployment Insurance
Productivity Gains from Unemployment Insurance
Date Written: November 1999
Abstract
This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs, and by encouraging firms to create those jobs. We use a quantitative general equilibrium model to investigate 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 becomes more generous starting from the current U.S. levels, there is an increase in unemployment similar in magnitude to the micro-estimates, but because the composition of jobs also changes, total output and welfare increase as well.
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