This paper is concerned with equity and efficiency in social security. If social security, ormore specifically unemployment insurance, leads to losses in employment and output, menwhy is it such a widely observed phenomenon? The first rationale for social security isutility interdependence or a preference for equality, combined with the public goodcharacter of income redistribut...

This paper argues that unemployment insurance increases labor productivity by encouraging workers to seek higher productivity jobs, and by encouraging firms to create those jobs. We use a quantitative model to investigate whether this effect is comparable in magnitude to the standard moral hazard effects of unemployment insurance. Our model economy captures the behavior of the U.S. labor market...

Following the Great Recession, most states’ unemployment insurance (UI) trust funds became insolvent, requiring the states to borrow from the U.S. Treasury to finance benefit payments. This article describes the basics of UI financing and reviews the origins of the financial crisis facing the federal-state UI system. It then examines the main components of the UI payroll tax—the taxable wage ba...

This paper constructs a tractable general equilibrium model of search with risk-aversion. An increase in risk-aversion reduces wages, unemployment and investment. Unemployment insurance (UI) has the opposite e ect: insured workers seek high wage jobs with high unemployment risk. An economy with risk-neutral workers achieves maximal output without any UI, but an economy with risk-averse workers ...