On Households and Unemployment Insurance
|Speaker:||Sekyu Choi, University of Bristol|
|Date: ||Friday 23 November 2018|
|Location: ||Matrix Lecture Theatre, Building One|
In this paper we study unemployment insurance in a framework where the main source of heterogeneity among agents is the type of household they live in: some agents live alone while others live with their spouses as a family. Our exercise is motivated by the fact that married individuals can rely on spousal income to smooth labor market shocks, while singles cannot. We extend a version of the standard incomplete markets model to include two-agent households and calibrate it to the US economy, with special emphasis on matching differences in labor market transitions among different types of households. Our central finding is that the US unemployment insurance program improves the welfare of single households but not of married ones. We show that this result is driven by the amount of self insurance existing in married households and thus, we highlight the interplay between self and government provided insurance and its implication for policy.