Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 7, Problem 11E
(a)
To determine
Explain the argument for and against the first statement.
(b)
To determine
Explain the argument for and against the first statement.
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consider the following two proposals to reform unemployment insurance. Explain the argument for and against each reform.
(a) The insurance payment would be increased so that it replaced 100% of a worker's regular labor income for 26 weeks.
(b) Each worker would be paid a lump sum equal to 10 weeks of his or her labor income at the start of the spell of unemployment. there would then be no other payments.
Unemployment There is a continuum of workers with identical probabilities λ of being fired each period when they are employed. With probability µ ∈ (0, 1), each unemployed worker receives one offer to work at wage w drawn from the cumulative distribution function F(w). If he accepts the offer, the worker receives the offered wage each period until he is fired. With probability 1 − µ, an unemployed worker receives no offer this employed and zero otherwise. There is no unemployment compensation. Each worker regards U as fixed and constant over time in making his decisions. a. For fixed U, write the Bellman equation for the worker. Argue that his optimal policy has the reservation wage property. b. Given the typical worker’s policy (i.e., his reservation wage), display a difference equation for the unemployment rate. Show that a stationary unemployment rate must satisfy c. Define a stationary equilibrium. d. Describe how to compute a stationary…
In considering the merits of lengthening the duration of unemployment benefits one should consider?
a. the reduction of moral hazard costs
b. that the self-insurance potential increases as the time period grows longer.
c. the increased value of consumption smoothing for the longer-term unemployed.
d. the reduction in cost due to the reduced need for retraining programs for the long-term unemployed.
Chapter 7 Solutions
Macroeconomics (Fourth Edition)
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- Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply. Extending the number of weeks for which unemployed workers are eligible for unemployment insurance benefits from the government Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks Establishing government-run employment agencies to connect unemployed workers to job vacanciesarrow_forwardWhich of the following is not an exception to the employment-at-will doctrine? Public policy Implied-contract Occupational Safety and Health Administration All of these are exceptions to the employment-at-will doctrinearrow_forwardOptimal unemployment insurance: Consider the following two proposals toreform unemployment insurance. Explain the arguments for and against eachreform.(a) Te insurance payment would be increased so that it replaced 100% of aworker’s regular labor income for 26 weeks.(b) Each worker would be paid a lump sum equal to 10 weeks of his or herlabor income at the start of the spell of unemployment. Tere would thenbe no other payments.arrow_forward
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