Working Paper: NBER ID: w19553
Authors: Casey B. Mulligan
Abstract: Uncertainty and its composition can affect the demand for social insurance, and thereby the labor market. This paper shows that small to medium-sized increases in uncertainty or risk aversion are enough to recommend an expansion of the safety net that would be broadly similar to the actual safety net expansions, which significantly depressed the labor market. Labor market effects of uncertainty through investment and insurance channels are also examined with employer and employee labor wedges.
Keywords: uncertainty; social insurance; labor market; risk aversion
JEL Codes: D33; E24; I38; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased uncertainty (D89) | higher demand for social insurance (G52) |
| higher demand for social insurance (G52) | lower labor market efficiency (J48) |
| increased uncertainty (D89) | lower labor market efficiency (J48) |
| marginal labor income tax rate changes (H31) | decrease in labor supply (J20) |
| uncertainty (D89) | affects labor through investment and insurance channels (J49) |
| uncertainty (D89) | creation of employer and employee labor wedges (J39) |