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A positive theory of geographic mobility and social insurance


Hassler, John; Rodríguez Mora, José; Storesletten, Kjetil; Zilibotti, Fabrizio (2005). A positive theory of geographic mobility and social insurance. International Economic Review, 46(1):263-303.

Abstract

This article presents a tractable dynamic general equilibrium model explaining cross-country data on geographical mobility, unemployment, and labor market institutions. Rational forward-looking agents vote on unemployment insurance (UI). Agents with higher moving costs (larger attachment to their location) prefer more generous UI. Attachment is assumed to increase with the duration of residence. UI mitigates incentives for moving and increases, therefore, the fraction of attached agents and the political support for UI. This self-reinforcing mechanism can yield two steady-states: one "European" and one "American." The former (latter) features high (low) unemployment, low (high) geographical mobility, and high (low) UI.

Abstract

This article presents a tractable dynamic general equilibrium model explaining cross-country data on geographical mobility, unemployment, and labor market institutions. Rational forward-looking agents vote on unemployment insurance (UI). Agents with higher moving costs (larger attachment to their location) prefer more generous UI. Attachment is assumed to increase with the duration of residence. UI mitigates incentives for moving and increases, therefore, the fraction of attached agents and the political support for UI. This self-reinforcing mechanism can yield two steady-states: one "European" and one "American." The former (latter) features high (low) unemployment, low (high) geographical mobility, and high (low) UI.

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26 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2005
Deposited On:28 Mar 2008 08:30
Last Modified:05 Apr 2016 12:22
Publisher:Wiley-Blackwell
ISSN:0020-6598
Additional Information:The definitive version is available at www.blackwell-synergy.com
Publisher DOI:https://doi.org/10.1111/j.0020-6598.2005.00318.x

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