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Self insurance and public employment programs

Author

Listed:
  • Sunanda Roy

    (Drake university)

Abstract

The paper studies the labor allocation decision by households faced with non-insurable labor income risks and establishes a case for a government sponsored public employment program as a provider of self-insurance to such households. We study the equilibria of a two period general equilibrium model with incomplete markets and two types of firms - a privately owned one offering a risky wage contract and a public works program offering a relatively riskfree one. We show that the employment level in the public program is higher in our model economy compared to that in a benchmark complete markets economy.

Suggested Citation

  • Sunanda Roy, 2007. "Self insurance and public employment programs," Economics Bulletin, AccessEcon, vol. 4(31), pages 1-15.
    • Handle: RePEc:ebl:ecbull:eb-07d50001
    as

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    References listed on IDEAS

    as
    1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    2. Matz Dahlberg & Anders Forslund, 2005. "Direct Displacement Effects of Labour Market Programmes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(3), pages 475-494, September.
    3. Murgai, Rinku & Ravallion, Martin, 2005. "Is a guaranteed living wage a good anti-poverty policy?," Policy Research Working Paper Series 3640, The World Bank.
    4. Drèze,Jacques, 1993. "Underemployment Equilibria," Cambridge Books, Cambridge University Press, number 9780521435246, September.
    5. Fredriksson, Peter, 1999. "The political economy of public employment programs," Journal of Public Economics, Elsevier, vol. 72(3), pages 487-504, June.
    6. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-190, March.
    7. Robert Townsend & Rolf Mueller, 1998. "Mechanism Design and Village Economies: From Credit, to Tenancy, to Cropping Groups," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 119-172, January.
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    More about this item

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • H0 - Public Economics - - General

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