|
on Insurance Economics |
|
Issue of 2010‒09‒03
three papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Makoto Nakajima |
| Abstract: | The author introduces risk-averse preferences, labor-leisure choice, capital, individual productivity shocks, and market incompleteness to the standard Mortensen-Pissarides model of search and matching and explore the model's cyclical properties. There are four main findings. First and foremost, the baseline model can generate the observed large volatility of unemployment and vacancies with a realistic replacement ratio of the unemployment insurance benefits of 64 percent. Second, labor-leisure choice plays a crucial role in generating the large volatilities; additional utility from leisure when unemployed makes the value of unemployment close to the value of employment, which is crucial in generating a strong amplification, even with the moderate replacement ratio. Besides, it contributes to the amplification through an adjustment in the intensive margin of labor supply. Third, the borrowing constraint or uninsured individual productivity shocks do not significantly affect the cyclical properties of unemployment and vacancies: Most workers are well insured only with self-insurance. Fourth, the model better replicates the business cycle properties of the U.S. economy, thanks to the co-existence of adjustments in the intensive and extensive margins of labor supply and the stronger amplification. |
| Keywords: | Employment (Economic theory) ; Business cycles |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:10-24&r=ias |
| By: | Toni Dechario; Patricia Mosser; Joseph Tracy; James Vickery; Joshua Wright |
| Abstract: | We describe a set of six design principles for the reorganization of the U.S. housing finance system and apply them to one model for replacing Fannie Mae and Freddie Mac that has so far received frequent mention but little sustained analysis – the lender cooperative utility. We discuss the pros and cons of such a model and propose a method for organizing participation in a mutual loss pool and an explicit, priced government insurance mechanism. We also discuss how these principles and this model are consistent with preserving the “to-be-announced,” or TBA, market – particularly if the fixed-rate mortgage remains a focus of public policy. |
| Keywords: | Government-sponsored enterprises ; Housing - Finance ; Mortgages ; Insurance, Government |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:466&r=ias |
| By: | Michael C. Burda (Humboldt University Berlin); Mark Weder (School of Economics, University of Adelaide) |
| Abstract: | Payroll taxes represent a major distortionary in uence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical uctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget renders gross wages more rigid over the cycle and, as a result, strengthens the modelÂ’s endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment. |
| Keywords: | business cycles, labor markets, payroll taxes, unemployment, consumption-tightness puzzle |
| JEL: | E24 J64 E32 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2010-17&r=ias |