What are the implications of unemployment insurance

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Reference no: EM133631005

Question 1. Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) is a pay as you go system based on a generational link, where current retiree benefits are funded by taxes paid by current workers that are collected into a trust fund. This trust fund is expected to be exhausted at any time in the next 10 years. After being depleted, current taxes collected will only be able to finance 75% of current benefits.

a) Discuss the market failure that Social Security was designed to address

b) Discuss how the generational link may have potentially affected the solvency of the OASDI trust fund

c) Discuss the implications of Social Security for the life cycle model and the theory consumption smoothing, especially for retirees

Question 2. Unemployment insurance is a joint federal-state social insurance program designed to help workers that are unemployed at no fault of their own.

a) Discuss the benefits and costs of this program

b) Why don't all states offer a replacement rate that is equal to 100%? Explain whether the variation in the replacement rates among states could lead to Tiebout mobility

c) What are the implications of unemployment insurance for the life cycle model and the theory of consumption smoothing, especially for the unemployed

Reference no: EM133631005

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