Unemployment Insurance in a Sticky-Price Model with Worker Moral Hazard

Gregory Givens

No 200807, Working Papers from Middle Tennessee State University, Department of Economics and Finance

Abstract: This paper studies the role of unemployment insurance in a sticky-price model that features an efficiency-wage view of the labor market based on unobservable effort. The risk-sharing mechanism central to the model permits, but does not force, agents to be fully insured. Structural parameters are estimated using a maximum-likelihood procedure on US data. Formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk. The results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain.

Keywords: Unemployment; Partial Insurance; Efficiency Wages; Sticky Prices. (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mac
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Citations: View citations in EconPapers (1)

Downloads: (external link)
http://capone.mtsu.edu/berc/working/insurance.pdf (application/pdf)

Related works:
Journal Article: Unemployment insurance in a sticky-price model with worker moral hazard (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mts:wpaper:200807

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