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lectures/un_insure.md

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@@ -143,7 +143,7 @@ to compute $V^u_{j+1}$.
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* Iterate to convergence.
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### Unemployment Insurance with 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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### The incentive problem
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### Incentive Problem
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The preceding efficient insurance scheme requires that the insurance agency
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control 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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## Unemployment Insurance with Private Information
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## Private Information
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Following Shavell and Weiss (1979) {cite}`Shavell_Weiss_79` and
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Hopenhayn and Nicolini (1997) {cite}`Hopenhayn_Nicolini_97`, now assume that the unemployment insurance agency cannot

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