This raises the question whether standard solution techniques such as linearization are accurate enough in those models in which enough volatility is generated. This paper shows that often this is not the case. When enough volatility is generated the non-linearities matter and both first-order...

This paper extends the existing literature on optimal unemployment insurance by allowing for self-insurance; individuals may save using a one-period riskless asset, but their access to the credit market is restricted. I show that under this market arrangement, an asset based unemployment insurance...