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Volume 9, Issue 2


Insurance-Markets Equilibrium with Double Indivisible Labor Supply

Vasilev, Aleksandar

Year: 2015   Volume: 9   Issue: 2   Pages: 91-103

Abstract: This note describes the lottery- and insurance-market equilibrium in an economy with both private and public sector employment and non-convex labor supply. In addition, when households are constrained to search for jobs only in a certain sector, the framework requires that there should be separate insurance markets: a public and a private sector one, which would pool the unemployment risk of the corresponding group of households. The unemployment insurance market segmentation is a new result in the literature and a direct consequence of the non-convexity of the labor supply in each sector and the sorting effect of the sector-type shock introduced in the model setup.

JEL classification: H31, J21

Keywords: indivisible labor, public employment, insurance


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