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lectures/un_insure.md

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@@ -24,7 +24,7 @@ Weiss's model.
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Hopenhayn and Nicolini's model is a generalization of Shavell and Weiss's along dimensions that we'll soon describe.
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## Shavell and Weiss's Model
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## Shavell and Weiss's model
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An unemployed worker orders stochastic processes of
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consumption and search effort $\{c_t , a_t\}_{t=0}^\infty$
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* Iterate to convergence.
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### Full Information
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### Full information
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Another benchmark model helps set the stage for the model with private information that we ultimately want to study.
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But the worker's consumption is not smoothed across states of
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employment and unemployment unless $V=V^e$.
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### Incentive Problem
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### Incentive problem
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The preceding efficient insurance scheme assumes that the insurance agency
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controls both $c$ and $a$.
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relies on the agency's ability to control *both* the unemployed
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worker's consumption *and* his search effort.
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## Private Information
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## Private information
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Following {cite}`Shavell_Weiss_79` and
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{cite}`Hopenhayn_Nicolini_97`, now assume that the unemployment insurance agency cannot
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### Computational Details
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### Computational details
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It is useful to note that there
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are natural lower and upper bounds to the set
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### Python Computations
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### Python computations
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We'll approximate the planner's optimal cost function with cubic splines.
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self.Ve = uw/(1-β)
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```
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### Parameter Values
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### Parameter values
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For the other parameters appearing in the above Python code, we'll calibrate parameter $r$
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### Computation under Private Information
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### Computation under private information
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V_star_interp = sp.interpolate.interp1d(Vu_grid,V_star)
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```
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### Replacement Ratios and Continuation Values
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### Replacement ratios and continuation values
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