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Optimal social insurance, incentives, and transition

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  • Andrew Atkeson
  • Patrick J. Kehoe

Abstract

We study transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty. When there are incentive problems in this rematching process, the optimal scheme may involve forced layoffs, involuntary unemployment, and a recession.

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  • Andrew Atkeson & Patrick J. Kehoe, 1995. "Optimal social insurance, incentives, and transition," Working Papers 546, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmwp:546
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    References listed on IDEAS

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    7. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
    8. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-1155, December.
    9. McAuley, Alastair, 1991. "The Economic Transition in Eastern Europe: Employment, Income Distribution, and the Social Security Net," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 7(4), pages 93-105, Winter.
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    Cited by:

    1. Atkeson, Andrew & Kehoe, Patrick J, 1996. "Social Insurance and Transition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 377-401, May.
    2. Mathias Dewatripont & Gérard Roland, 1996. "Transition as a process of large‐scale institutional change," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 1-30, May.

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