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T HE S IMPLE A NALYTICS OF J OB D ISPLACEMENT I NSURANCE
Author(s) -
Parsons Donald O.
Publication year - 2019
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12216
Subject(s) - unemployment , moral hazard , earnings , wage , layoff , economics , business , labour economics , microeconomics , finance , incentive , economic growth
A BSTRACT Job displacement is a threat to the earnings of long‐tenured workers through (1) unemployment spells and (2) reduced reemployment wages. Although full insurance requires both unemployment benefits and wage insurance, supply difficulties limit actual‐loss insurance, and separation packages include partial unemployment insurance and scheduled (fixed sum) severance pay. The design of this two‐dimensional package requires a systems approach as well as a generalized replacement ratio measure of adequacy. Job search moral hazard and layoff moral hazard (firing costs) introduce serious contracting concerns. Economic theory provides a guide to the integration of these insurance instruments in this complex planning environment.