Liquidity and insurance for the unemployed
By: Robert Shimer, Ivan Werning.
Contributors: Werning, Iván.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11689; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11689.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Insurance, Unemployment -- Mathematical models
Description: "We study the optimal design of unemployment insurance for workers sampling job opportunities over time.  We focus on the optimal timing of benefits and the desirability of allowing workers to freely access a riskless asset.  When workers have constant absolute risk aversion preferences it is optimal to use a very simple policy: a constant benefit during unemployment, a constant tax during employment that does not depend on the duration of the spell, and free access to savings using a riskless asset.  Away from this benchmark, for constant relative risk aversion preferences, the welfare gains of more elaborate policies are minuscule.  Our results highlight two largely distinct roles for policy toward the unemployed: (a) ensuring workers have sufficient liquidity to smooth their consumption; and (b) providing unemployment benefits that serve as insurance against the uncertain duration of unemployment spells"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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