This paper describes the efficient allocation of consumption and work effort in an economy in which workers face idiosyncratic employment risk and considerations of moral hazard prevent full insurance. We impose a lower bound on the expected discounted utility that can be assigned to any agent from...

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Bibliographic Details

Main Authors:	Atkeson, Andrew 1961- (Author), Lucas, Robert E. 1937-2023 (Author)
Format:	Book
Language:	English
Published:	Cambridge, MA 1993
Series:	National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 4381
Subjects:	Mathematisches Modell Resource allocation > Mathematical models Unemployment insurance > Mathematical models
Summary:	This paper describes the efficient allocation of consumption and work effort in an economy in which workers face idiosyncratic employment risk and considerations of moral hazard prevent full insurance. We impose a lower bound on the expected discounted utility that can be assigned to any agent from any date onward, and show, with this feature added, that the efficient unemployment insurance scheme induces an invariant cross sectional distribution of individual entitlements to utility. The paper thus provides a simple prototype model suited to the study of the normative question: what is the tradeoff between equality and efficiency in resource allocation?
Physical Description:	45 S. graph. Darst.