A Positive Theory of Geographic Mobility and Social Insurance

Topics:
Insurance
Tags:
Agent,
Business Operations,
Insurance,
Mobility,
Real Estate,
Theory,
Unemployment Insurance
Source:
Stockholm University

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Overview: This paper presents a tractable dynamic general equilibrium model that can explain cross-country empirical regularities in geographical mobility, unemployment and labor market institutions. Rational agents vote over unemployment insurance (UI), taking the dynamic distortionary effects of insurance on the performance of the labor market into consideration. Agents with higher cost of moving, i.e., more attached to their current location, prefer more generous UI. The key assumption is that an agent's attachment to a location increases the longer she has resided there. UI reduces the incentive for labor mobility and increases, therefore, the fraction of attached agents and the political support for UI.

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Format: PDF | Size: 582KB | Date: Aug 2002 | Pages: 46

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