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Using variations in unemployment insurance policies over time and across U.S. states, this paper provides evidence that allowing unemployed workers to delay the collection of benefits increases their job-finding rate. In a model with discrete job take-up decisions, benefit entitlement, wage-indexed benefits, and heterogeneous job types, I demonstrate that the policy can increase an unemployed worker's willingness to work, even though more benefits in general reduce the relative value of employment. In a calibrated quantitative model, I find that allowing delayed benefit collection increases the overall job finding rates and may lower the unemployment rate both in a steady state stationary economy and over a transition path during 2008-12. JEL classification: E24, J65 Key words: unemployment insurance, social program design, Great Recession, 1 INTRODUCTION A common assumption in the literature on unemployment insurance (UI) policy is that once an unemployed worker finds a job, she loses any uncollected benefits. This assumption does [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jmoneco.2008.05.006 Byline: Kartik B. Athreya Abstract: The widespread use of debt and default suggests that unsecured credit markets play an important role in consumption smoothing. In this paper, I address two previously unanswered questions. First, how does policy towards debt default affect the evolution of consumption and net worth over the life-cycle? Second, how does debt default policy interact with social insurance over the life-cycle? The findings are as follows. First, US default policy appears 'lax', in the sense that it creates severe credit constraints, especially for the young. Second, eliminating default will lower consumption inequality among the young, but will increase it among the old. Third, social insurance alters default risk and, in turn, loan pricing, and therefore matters for purely intertemporal smoothing. Author Affiliation: Research Department, Federal Reserve Bank of Richmond, P.O. Box 27622, Richmond, VA 23261, USA Article History: Received 30 November 2006; Revised 1 May 2008; Accepted 2 May 2008 Article Note: (footnote) [star] I am grateful to both the editor, Janice Eberly, and an anonymous referee for very valuable suggestions and extremely careful reading. I thank Ahmet Akyol, Yongsung Chang, Huberto Ennis, Juan Carlos Hatchondo, Chris Herrington, Mark Huggett, Igor Livshits, Jim MacGee, Brian Minton, Victor Rios-Rull, Andrea Waddle, and Steve Williamson for discussions. I thank Hubert Janicki, Andrea Waddle, and Brian Gaines for outstanding research assistance.

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-6261.2007.01292.x Byline: YULIYA DEMYANYK, CHARLOTTE OSTERGAARD, BENT E. SORENSEN (*) Abstract: ABSTRACT We estimate the effects of deregulation of U.S. banking restrictions on interstate personal income insurance for the period 1970 to 2001. Interstate income insurance occurs when personal income reacts less than one-to-one to state-specific output shocks. We find that insurance improved after banking deregulation, with a larger effect in states where small businesses are more important and on proprietors' income than on other components of personal income. Our explanation centers on the role of banks as a prime source of small business finance and on the close intertwining of the personal and business finances of small business owners. Article note: (*) Yuliya Demyanyk is at the Federal Reserve Bank of St. Louis. Charlotte Ostergaard is at the Norwegian School of Management and Norges Bank. Bent Sorensen is at the University of Houston and the CEPR. We thank an anonymous referee for very constructive comments. For further comments and discussions we thank the Editor, an anonymous Associate Editor, Allen Berger, Arnoud Boot, Ralf Elsas, Dmytro Holod, Joe Mason, Mitchell Petersen, Richard Rosen, and Stijn Van Nieuwerburgh, and seminar and conference participants at the University of Vienna, the University of Zurich, the 2004 European Finance Association Meetings in Maastricht, the 2004 University of Houston/Dallas Federal Reserve conference 'International Financial Integration and Risk Sharing' in Houston, the 2005 CFS conference 'Risk Transfer Between (Re-) Insurers, Banks, and Markets' in Frankfurt, the 2005 Econometric Society Meetings in Philadelphia, and the 2006 FIRS Conference on Banking, Corporate Finance, and Intermediation in Shanghai. We thank Pat Reilich and Lindsay Ludwig at the FDIC for help with Call Report data and Philip Strahan for sharing his measures of bank integration. Sorensen thanks Norges Bank for its hospitality. The views expressed in this paper are those of the individual authors and do not necessarily reflect the position of the Federal Reserve Bank of St. Louis or the Federal Reserve System.

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Z. Bodie, 1990, 'Inflation Insurance', Journal of Risk and Insurance, 57:634-645 Terence Lim (1), Andrew W. Lo (2), Robert C. Merton (3) and Myron S. Scholes (4) (1) Goldman Sachs [...]

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M. Brennan, 1993, 'Aspects of Insurance, Intermediation and Finance', Geneva Papers On Risk and Insurance Theory, 18:7-30 P. Brockett and R. Witt, 1991, 'Relevant Distributions for Insurance Prices in an [...]