American Economic Review Vol. 105 No. 2 2015
Optimal Life Cycle Unemployment Insurance
Abstract
We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers.
- DOI
- 10.1257/aer.20111559
- Volume
- 105
- Issue
- 2
- Pages
- 816-859
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref