Logo
Munich Personal RePEc Archive

Government Commitment and Unemployment Insurance Over the Business Cycle

Pei, Yun and Xie, Zoe (2016): Government Commitment and Unemployment Insurance Over the Business Cycle.

[img]
Preview
PDF
MPRA_paper_76563.pdf

Download (1MB) | Preview

Abstract

We investigate the role of government commitment to future policies in shaping unemployment insurance (UI) policy in a stochastic general equilibrium model of labor search and matching. Compared with the optimal(Ramsey)policy of a government with commitment, the policy under no commitment characterized by a Markov-perfect equilibrium has higher benefits and leads to higher unemployment rates in the steady state. We also find starkly different policy responses to a productivity shock or changes in unemployment. The differences arise because the Ramsey government can use an ex-ante committed policy to stimulate job search.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.