Choosing Unemployment Benefits:the Role of Adverse Selection and Moral Hazard

Laura Khoury (1)

1 Norwegian School of Economics and Business Administration

Most unemployment insurance (UI) schemes mandate a single benefit schedule,while little empirical findings support this mandate. In this paper, I exploit aFrench program where workers are given a choice between two different UI sched-ules, providing an ideal setup to evaluate both moral hazard and selection intoUI. Using high-quality administrative data, I measure significant adverse selectionby relating the entitlement choice with the characteristics of the insured. Moralhazard is even larger, as shown by a fuzzy regression discontinuity design using aneligibility criterion: choosing a short schedule with higher average benefits increasesunemployment duration by six months.

Mots clés: Unemployment; Insurance design; moral hazard; adverse selection; insurance design

Domaines: Economies et finances

Laura Khoury. Choosing Unemployment Benefits:the Role of Adverse Selection and Moral Hazard. 2021. ⟨halshs-02057137v2⟩