Moral Hazard among the Employed: Evidence from a Regression Discontinuity – Robin Jessen

Sprecher

Robin Jessen (RWI – Leibniz Institute for Economic Research)

Abstract

Does unemployment insurance (UI) introduce moral hazard among the employed? We leverage discontinuities in Poland that (quasi-randomly) determine benefit generosity and duration. In addition to reducing exit from unemployment, we find that more generous unemployment insurance significantly increases the hazard that employed workers become unemployed. Workers that enter unemployment because of more generous benefits are essentially identical to the infra-marginal unemployed workers in terms of demographics, education, and history with unemployment.  We extend a model of optimal UI to account for moral hazard among the employed. The results demonstrate that the behavioural distortions of the employed from more generous benefits are substantial. 

Raum

Lecture Hall (A-032)