Article ID Journal Published Year Pages File Type
957805 Journal of Economic Theory 2006 14 Pages PDF
Abstract

Using an efficiency-wage model, we examine the relationship between indeterminacy and unemployment insurance. It is shown that the less unemployment insurance is, the more likely equilibrium is to be indeterminate. Equilibrium can be indeterminate even without externalities or increasing returns, which makes a sharp contrast to the recent literature on indeterminacy. Our result is based on the fact that the no-shirking condition with marginal utility of wealth kept constant is downward sloping when income insurance is not perfect.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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