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Felicitamos al profesor Hernán Ruffo por su reciente publicación en The American Economic Review


American Economic Review
Vol. 105, Issue 2
February 2015

Optimal Life Cycle Unemployment Insurance

Claudio Michelacci and Hernán Ruffo

We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers. (JEL D91, E24, J13, J64, J65)