Does Unemployment Insurance Crowd Out Home Production?

Does Unemployment Insurance Crowd Out Home Production?

Title : Does Unemployment Insurance Crowd Out Home Production?
Number : 13/23
Author(s) : Bülent Güler, Temel Taşkın
Language : English
Date : May 2013
Abstract : In this paper, we study the interaction between self insurance and public insurance. In particular, we provide evidence on a negative correlation between unemployment insurance benefits and home production using the American Time Use Survey (ATUS) and the state-level unemployment insurance data of the U.S. The empirical results suggest that moving to a two times more generous state would decrease time spent on home production about 22\% for the unemployed. Then, we pursue a quantitative assessment of this empirical finding using a dynamic competitive equilibrium model in which households do home production as well as market production. The model is able to generate the empirical facts regarding the unemployment benefits and home production. The fact that unemployment insurance benefits crowd out home production is interpreted as a substitution between the two insurance mechanisms against loss of earnings during unemployment spells.
Keywords : Unemployment insurance, Home production, Public insurance, Self insurance, Heterogeneous-agents models
JEL Codes : D13; E21; J65

 

Does Unemployment Insurance Crowd Out Home Production?
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