%0 Report
        %A Ignaszak, Marek
%A Jung, Philip
%A Kuester, Keith
        %T Federal Unemployment Reinsurance and Local Labor-Market Policies
        %D 2020
        %8 2020 Nov
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 13886
        %U https://www.iza.org/publications/dp13886
        %X Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between moral hazard and insurance. Calibrating the economy to a stylized European Monetary Union, we find notable welfare gains if the federal scheme's payouts take the member states' past unemployment level as a reference point. Member states' control over policies other than unemployment benefits can limit generosity during the transition phase.
        %K unemployment reinsurance
%K labor-market policy
%K fiscal federalism
%K search and matching