Knowledge of Future Job Loss and Implications for Unemployment Insurance

Nathaniel Hendren

NBER Working Paper No. 21819
Issued in December 2015, Revised in July 2016
NBER Program(s):Aging, Health Care, Health Economics, Industrial Organization, Labor Studies, Public Economics

This paper studies the implications of individuals’ knowledge of future job loss for the existence of an unemployment insurance (UI) market. Learning about job loss leads to consumption decreases and spousal labor supply increases. This suggests existing willingness to pay estimates for UI understate its value. But, it yields new estimation methodologies that account for and exploit responses to learning about future job loss. Although my new willingness to pay estimates exceed previous estimates, I estimate much larger frictions imposed by private information. This suggests privately-traded UI policies would be too adversely selected to be profitable, at any price.

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Document Object Identifier (DOI): 10.3386/w21819

Published: Nathaniel Hendren, 2017. "Knowledge of Future Job Loss and Implications for Unemployment Insurance," American Economic Review, vol 107(7), pages 1778-1823.

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