Question

Name 2 examples of moral hazard that has been found by researchers with the Unemployment Insurance social insurance program.

Answer 1

moral hazard be defined as the lack of incentive to to guard against the tendency of risk where one is protected from its consequences especially via insurance.

Following are two examples of moral hazard associated with the unemployment insurance social insurance program.

1) when people get paid off or can't find employment, they apply for unemployment insurance. When they get unemployment insurance, it reduces job search intensity and prolongs unemployment .

2) Suppose a country Increases it's unemployment insurance by a higher amount as a part of implementing it's social security programs, the workers may end up losing the incentive to look for a at job elsewhere and work at all since they are provided with a steady source of income.

Therefore generous unemployment insurance programs often do more harm than good to the economy.