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Principles of Economics- Mankiw (5th) 573

Principles of Economics- Mankiw (5th) 573 - CHAPTER 26 U N...

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CHAPTER 26 UNEMPLOYMENT AND ITS NATURAL RATE 591 Even though unemployment insurance reduces search effort and raises unem- ployment, we should not necessarily conclude that the policy is a bad one. The program does achieve its primary goal of reducing the income uncertainty that workers face. In addition, when workers turn down unattractive job offers, they have the opportunity to look for jobs that better suit their tastes and skills. Some economists have argued that unemployment insurance improves the ability of the economy to match each worker with the most appropriate job. The study of unemployment insurance shows that the unemployment rate is an imperfect measure of a nation’s overall level of economic well-being. Most economists agree that eliminating unemployment insurance would reduce the amount of unemployment in the economy. Yet economists disagree on whether economic well-being would be enhanced or diminished by this change in policy. QUICK QUIZ:
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