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A positive theory of geographical mobility and social insurance

A positive theory of geographical mobility and social insurance
A positive theory of geographical mobility and social insurance
This article presents a tractable dynamic general equilibrium model explaining cross-country data on geographical mobility, unemployment, and labor market institutions. Rational forward-looking agents vote on unemployment insurance (UI). Agents with higher moving costs (larger attachment to their location) prefer more generous UI. Attachment is assumed to increase with the duration of residence. UI mitigates incentives for moving and increases, therefore, the fraction of attached agents and the political support for UI. This self-reinforcing mechanism can yield two steady-states: one “European” and one “American.” The former (latter) features high (low) unemployment, low (high) geographical mobility, and high (low) UI.
0020-6598
263-303
Hassler, John
4342a8e4-be19-467d-903b-b392d86bc5e6
Rodriguez Mora, José V.
37b4fabc-8a25-401a-aee8-8a6924b85b21
Storesletten, Kjetil
32040f20-7f88-45e1-b04f-9ec6667f7f3d
Zilibotti, Fabrizio
4e5e129e-cb11-4b09-8ba4-ce400e638712
Hassler, John
4342a8e4-be19-467d-903b-b392d86bc5e6
Rodriguez Mora, José V.
37b4fabc-8a25-401a-aee8-8a6924b85b21
Storesletten, Kjetil
32040f20-7f88-45e1-b04f-9ec6667f7f3d
Zilibotti, Fabrizio
4e5e129e-cb11-4b09-8ba4-ce400e638712

Hassler, John, Rodriguez Mora, José V., Storesletten, Kjetil and Zilibotti, Fabrizio (2005) A positive theory of geographical mobility and social insurance. International Economic Review, 46 (1), 263-303. (doi:10.1111/j.0020-6598.2005.00318.x).

Record type: Article

Abstract

This article presents a tractable dynamic general equilibrium model explaining cross-country data on geographical mobility, unemployment, and labor market institutions. Rational forward-looking agents vote on unemployment insurance (UI). Agents with higher moving costs (larger attachment to their location) prefer more generous UI. Attachment is assumed to increase with the duration of residence. UI mitigates incentives for moving and increases, therefore, the fraction of attached agents and the political support for UI. This self-reinforcing mechanism can yield two steady-states: one “European” and one “American.” The former (latter) features high (low) unemployment, low (high) geographical mobility, and high (low) UI.

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Published date: 2005

Identifiers

Local EPrints ID: 39705
URI: https://eprints.soton.ac.uk/id/eprint/39705
ISSN: 0020-6598
PURE UUID: 307f0035-15f0-433b-868d-2371a054015b

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Date deposited: 29 Jun 2006
Last modified: 17 Jul 2017 15:35

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Contributors

Author: John Hassler
Author: José V. Rodriguez Mora
Author: Kjetil Storesletten
Author: Fabrizio Zilibotti

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