Labour Mobility and Decision Making on Social Insurance in an Integrated Market

In a two-country model the consequences of labour mobility on social insurance levels are studied. There are two groups of workers, one with a high risk and the other one with a low risk of being nonemployed. In both countries the decision-making function on social insurance is some weighted average of the expected utilities of both groups. In case low-risk workers are much more mobile than high-risk workers, it can be concluded that labour mobility does not necessarily have a downward effect on social insurance. In that case coordination of decision making would not improve the levels of social insurance.