Options for an efficient organization of unemployment insurance (original publication in German)

The paper is about the economically efficient design of financial transfers to the unemployed in a highly industrialized country. There have been quite a few contributions to this problem – for example by Beenstock/Brasse, Feldstein/ Altman, Grubel, Orzag/Snower – which are presented and discussed. It turns out that a true unemployment insurance would be the most efficient way to solve the transfer problem. The second part of the paper deals with often-raised objections against such a solution. For example, insurability is often denied on the ground that an unemployment insurance would be too expensive due to moral hazard and adverse selection. It is shown that neither moral hazard nor adverse selection are insurmountable obstacles to a private insurance market.

Kiel Institute Expert