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Social Insurance and Transition

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  • Andrew Atkeson
  • Patrick J. Kehoe

Abstract

We study the general equilibrium effects of social insurance on the 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. We find that adding social insurance may slow transition. When there are incentive problems in this rematching process, the optimal social insurance scheme may involve forced layoffs and involuntary unemployment.

Suggested Citation

  • Andrew Atkeson & Patrick J. Kehoe, 1993. "Social Insurance and Transition," NBER Working Papers 4411, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4411
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