Economics and Business Economics Seminar (ECO): Malthe Elholm, Aarhus University

Title: Voluntary Unemployment Insurance

Info about event

Time

Monday 24 March 2025,  at 13:00 - 14:00

Location

Fuglesangs Allé 4, Building 2632(L), Room 242

Abstract:

Denmark is one of the few countries where unemployment insurance (UI) is voluntary. Despite substantial state subsidies, a significant share of workers remain uninsured. We leverage this unique institutional setting to assess the welfare implications of UI in the presence of moral hazard and adverse selection.

To do so, we develop a heterogeneous-agent job search model in which workers can voluntarily enroll in a government-provided UI scheme. In addition to UI, workers can self-insure through precautionary savings and, while unemployed, by adjusting their search effort. The model is calibrated to Danish labor market data to capture key dimensions of worker heterogeneity.

We find that mandating UI improves aggregate welfare, though the effects are heterogeneous across individuals.