(Solved):Gruber (2000) found evidence that the elasticity of labor supply with respect to DI benefits is considerably smaller than the estimates of the elasticity of unemployment durations with respect to U… View Answer…

 

Question

Gruber (2000) found evidence that the elasticity of labor supply with respect to DI benefits is considerably smaller than the estimates of the elasticity of unemployment durations with respect to UI benefits. Why might moral hazard be less of an issue in the DI program than in the UI program?

 

EXPERT ANSWER

There has to be revealing imbalance, and the one benefiting should have control over the time taken by the situation

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