Open Access
Unemployment Insurance and Home Production
Loading...
Files
MWP_Taskin_2011_29.pdf (220.84 KB)
Taskin (2011)
License
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
1830-7728
Issue Date
Type of Publication
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
EUI MWP; 2011/29
Cite
TASKIN, Temel, Unemployment Insurance and Home Production, EUI MWP, 2011/29 - https://hdl.handle.net/1814/18894
Abstract
In this paper, we incorporate home production into a quantitative model of unemployment and show that realistic levels of home production have a significant impact on the optimal unemployment insurance rate. Motivated by recently documented empirical facts, we augment an incomplete markets model of unemployment with a home production technology, which allows unemployed workers to use their extra non-market time as partial insurance against the drop in income due to unemployment. In the benchmark model, we find that the optimal replacement rate in the presence of home production is roughly 40% of wages, which is 40% lower than the no home production model’s optimal replacement rate of 65%. The 40% optimal rate is also close to the estimated rate in practice. The fact that home production makes a significant difference in the optimal unemployment insurance rate is robust to a variety of parameterizations and alternative model environments.
Table of Contents
Additional Information
This paper is a part of the author's Ph.D. thesis at the University of Rochester.