Program > Papers by speaker > Bocognano Laurène

Optimal Unemployment Insurance with Endogenous Preferences
Laurène Bocognano  1@  , Bruno Decreuse  2@  
1 : Aix-Marseille University  (AMU)
École des Hautes Études en Sciences Sociales : UMR7316, Aix Marseille Université : UMR7316, Ecole Centrale de Marseille : UMR7316, Centre National de la Recherche Scientifique : UMR7316
5-9 Boulevard BourdetCS 5049813205 Marseille Cedex 1 -  France
2 : Aix-Marseille School of Economics  (AMSE)
Ecole Centrale Marseille (ECM), Ecole des Hautes Etudes en Sciences Sociales (EHESS), Centre national de la recherche scientifique (CNRS)
GREQAM, Centre de la Charité, 2 rue de la Charité, 13236 Marseille Cedex 02 -  France

This paper mixes state-dependent utility theory with endogenous preferences to investigate the optimality of unemployment insurance. In our model, individuals assign weights to consumption units in two possible states: work or unemployment. The higher the weight assigned to consumption in the work state, the lower the one assigned to consumption in the unemployment state. These weights shape the magnitude of moral hazard effects while searching for jobs as well as the desire for unemployment insurance. The model can predict that the demand for social insurance remains low despite unemployment exposure is large. In a sufficient statistics approach à la Chetty, we find a new sufficient statistics formula which takes into account inherited values. We show that unemployment insurance is higher than the optimal level in a lot of countries, except for the UK, due to high preferences for work. In a second part of the paper we extend the model to explain the difference in take-up rates of unemployment insurance for different social backgrounds.


Online user: 2 Privacy
Loading...