@techreport{NBERw6686,
 title = "Efficient Unemployment Insurance",
 author = "Daron Acemoglu and Robert Shimer",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6686",
 year = "1998",
 month = "August",
 URL = "http://www.nber.org/papers/w6686",
 abstract = {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 reverse effect due to market generated moral hazard: insured workers seek high wage jobs with high unemployment risk. An economy with risk-neutral workers achieves maximal output without any UI.  In contrast, in an economy with risk-averse workers, a positive level of UI maximizes output.  Therefore, moderate UI not only improves risk-sharing, but also increases output.},
}