A Positive Theory of Geographic Mobility and Social Insurance
2002 (English)Report (Other academic)
this paper presents a tractable dynamic general equilibrium model that can explain cross-country empirical regularities in geographical mobility, unemployment and labor market institutions. Rational agents vote over unemployment insurance (UI), taking the dynamic distortionary effects of insurance on the performance of the labor market into consideration. Agents with higher cost of moving, i.e., more attached to their current location, prefer more generous UI. The key assumption is that an agent's attachment to a location increases the longer she has resided there. UI reduces the incentive for labor mobility and increases, therefore, the fraction of attached agents and the political support for UI. The main result is that this self-reinforcing mechanism can give rise to multiple steady-states - one "European" steady-state featuring high unemployment, low geographical mobility and high unemployment insurance, and one "American" steady-state featuring low unemployment, high mobility and low unemployment insurance.
Place, publisher, year, edition, pages
Stockholm: IIES , 2002. , 53 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X
Employment, migration, geographical mobility, political equilibrium, unemployment insurance, voting
IdentifiersURN: urn:nbn:se:su:diva-41190OAI: oai:DiVA.org:su-41190DiVA: diva2:328967