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Why Unemployment Insurance Might Not Only Be Good for the Soul, It Might Also Be Good for the Economy

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  • Morris Altman

Abstract

Contrary to the conventional view that unemployment insurance serves to directly increase the rate of unemployment as well as reducing an economy's competitiveness by increasing the market wage of labor, the argument presented in this paper is that this worldview critically depends on unrealistic behavioral assumptions. A more realistic modeling suggests that unemployment rates need not rise and competitiveness need not deteriorate with the introduction of or improvements in unemployment insurance, which can also induce increases in economic efficiency. These analytical predictions are consistent with the empirics of unemployment insurance. Unemployment insurance can therefore protect the unemployed without damaging the economy.

Suggested Citation

  • Morris Altman, 2004. "Why Unemployment Insurance Might Not Only Be Good for the Soul, It Might Also Be Good for the Economy," Review of Social Economy, Taylor & Francis Journals, vol. 62(4), pages 517-541.
    • Handle: RePEc:taf:rsocec:v:62:y:2004:i:4:p:517-541
    DOI: 10.1080/0034676042000296245
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    References listed on IDEAS

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    1. Richard B. Freeman, 1994. "Working Under Different Rules," NBER Books, National Bureau of Economic Research, Inc, number free94-1.
    2. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    Cited by:

    1. Manuel Couret Pereira Branco & Pedro Damião de Sousa Henriques, 2009. "Human Rights as a Tool for Sustainable Development," CEFAGE-UE Working Papers 2009_11, University of Evora, CEFAGE-UE (Portugal).
    2. Bruce E. Kaufman, 2012. "Wage Theory, New Deal Labor Policy, and the Great Depression: Were Government and Unions to Blame?," ILR Review, Cornell University, ILR School, vol. 65(3), pages 501-532, July.
    3. Altman, Morris, 2014. "Insights from behavioral economics on how labor markets work," Working Paper Series 3466, Victoria University of Wellington, School of Economics and Finance.
    4. Altman, Morris, 2014. "Insights from behavioral economics on how labor markets work," Working Paper Series 18843, Victoria University of Wellington, School of Economics and Finance.

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