Nuremberg Research Seminar in Economics on 22 November 2023 – LG 0.423
You are invited to join the weekly Nuremberg Research Seminar in Economics on 22 November 2023, from 13.15 to 14.45 pm. The seminar will be held in room LG 0.423. Robin Jessen (RWI Essen) will be talking about „Moral Hazard among the Employed and the Unemployed: A Comparison of Benefit Duration and Levels”.
More information can be found here:
Policymakers face trade-offs between the benefits of social insurance and the unintended consequences of moral hazard. We use discontinuities in the Polish unemployment insurance system to estimate the employment effects of benefit generosity and benefit duration. The estimates reveal that more generous benefits not only reduce exit from unemployment, but also substantially increase worker entry into unemployment. We derive formulas for the welfare effects of marginal changes in UI generosity via increases in either benefit levels or durations, which depend on the adjustments both in job search effort and the job separation rate. We show that the Baily-Chetty formula is a special case of our formula. Our analysis reveals that a $1-increase in benefit generosity/duration incurs a behavioral cost of $2.6 for benefit increases and of around $11 for duration increases. For the benefit duration, the welfare loss is dominated by the distortion on separations.