Incomplete Unemployment Insurance under Aggregate Fluctuations

Yann Algan (1) , Olivier Allais (2)

1 ECON - Département d'économie (Sciences Po)
2 CORELA - Laboratoire de Recherche sur la Consommation

This paper reconsiders the welfare benefit of unemployment insurance when individuals might self−insure through private savings but face aggregate fluctuations. We conclude that previous studies have under−estimated by half the average welfare gain from unemployment benefit by ignoring aggregate price and employment uncertainty. But paradoxically enough, the poorest are less in favour of unemployment benefit when business cycles are taken into account. This result is due to favorable price effects which dominate the unemployment uncertainty.

Domaines: Economies et finances

Yann Algan, Olivier Allais. Incomplete Unemployment Insurance under Aggregate Fluctuations. Bulletin of Indonesian Economic Studies, 2004, 5 (14), pp.1-7. ⟨hal-01020122⟩