Unemployment Insurance under Moral Hazard and Limited Commitment: Public versus Private Provision

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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.
Original languageEnglish
Pages (from-to)151-181
Number of pages31
JournalJournal of Public Economic Theory
Volume9
Issue number1
DOIs
Publication statusPublished - Feb 2007

Keywords / Materials (for Non-textual outputs)

  • social insurance
  • moral hazard
  • limited commitment
  • unemployment insurance
  • crowding out

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