Rethinking unemployment insurance: New evidence on hidden costs

Submitted by pmassetti on
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CEPR (24.02.2025) As governments worldwide grapple with labour shortages and systemic budget shortfalls, the question arises of how unemployment insurance policies potentially contribute to this imbalance by increasing and extending nonemployment. This column argues that recent debates around unemployment insurance reform, which often focus on the effect among job seekers, overlook potential unintended consequences among the employed. Taking moral hazard among employed workers into account has substantial effects on the welfare implications of unemployment insurance.
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