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Sunanda Roy
''Self insurance and public employment programs''
( 2007, Vol. 4 No.31 )
The paper studies the labor allocation decision by households faced with non-insurable labor income risks and establishes a case for a government sponsored public employment program as a provider of self-insurance to such households. We study the equilibria of a two period general equilibrium model with incomplete markets and two types of firms - a privately owned one offering a risky wage contract and a public works program offering a relatively riskfree one. We show that the employment level in the public program is higher in our model economy compared to that in a benchmark complete markets economy.
JEL: D5 - General Equilibrium and Disequilibrium: General
Manuscript Received : Mar 29 2007 Manuscript Accepted : Sep 03 2007

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