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Unemployment accounts and employment incentives

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  • Brown, Alessio J.G.
  • Orszag, J. Michael
  • Snower, Dennis J.

Abstract

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high high-unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.

Suggested Citation

  • Brown, Alessio J.G. & Orszag, J. Michael & Snower, Dennis J., 2008. "Unemployment accounts and employment incentives," European Journal of Political Economy, Elsevier, vol. 24(3), pages 587-604, September.
    • Handle: RePEc:eee:poleco:v:24:y:2008:i:3:p:587-604
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    Citations

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    Cited by:

    1. Boeri, Tito & Jimeno, Juan Francisco, 2015. "The unbearable divergence of unemployment in Europe," LSE Research Online Documents on Economics 65001, London School of Economics and Political Science, LSE Library.
    2. Setty, Ofer, 2011. "Unemployment Accounts," Foerder Institute for Economic Research Working Papers 275748, Tel-Aviv University > Foerder Institute for Economic Research.
    3. Brown, Alessio J. G. & Snower, Dennis J., 2009. "Incentives and complementarities of flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy (IfW Kiel).
    4. David A. Robalino, 2014. "Designing unemployment benefits in developing countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-15, July.
    5. David Robalino & Michael Weber, 2013. "Designing and implementing unemployment benefit systems in middle and low income countries: beyond risk-pooling vs savings," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-20, December.
    6. Dennis J. Snower & Alessio J. G. Brown & Christian Merkl, 2009. "Globalization and the Welfare State: A Review of Hans-Werner Sinn's Can Germany Be Saved?," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 136-158, March.
    7. repec:hal:spmain:info:hdl:2441/2vagho9cns9668gqt9f4q5v8rg is not listed on IDEAS
    8. Martin Feldstein & Daniel Altman, 2007. "Unemployment Insurance Savings Accounts," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 35-64, National Bureau of Economic Research, Inc.
    9. repec:spo:wpmain:info:hdl:2441/2vagho9cns9668gqt9f4q5v8rg is not listed on IDEAS
    10. Boeri, Tito & Jimeno, Juan F., 2016. "Learning from the Great Divergence in unemployment in Europe during the crisis," Labour Economics, Elsevier, vol. 41(C), pages 32-46.
    11. Keuschnigg, Christian & Fisher, Walter, 2011. "Life-Cycle Unemployment, Retirement and Parametric Pension Reform," Economics Working Paper Series 1119, University of St. Gallen, School of Economics and Political Science.
    12. Romain Duval & Prakash Loungani, 2021. "Designing Labor Market Institutions in Emerging Market and Developing Economies: A Review of Evidence and IMF Policy Advice," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 31-83, March.
    13. Nagler, Paula, 2015. "The impact of unemployment insurance savings accounts on subsequent employment quality," MERIT Working Papers 2015-026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Egbert Jongen, 2009. "An analysis of individual accounts for the unemployment risk in the Netherlands," CPB Document 186, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Bruno Coquet, 2017. "Les allocations chômage devraient-elles être dégressives ?," SciencePo Working papers Main hal-03457573, HAL.
    16. Siebert, Horst, 2006. "Old Europe's social model: A reason of low growth? The case of Germany," Kiel Working Papers 1291, Kiel Institute for the World Economy (IfW Kiel).
    17. Egbert Jongen, 2009. "An analysis of individual accounts for the unemployment risk in the Netherlands," CPB Document 186.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Parsons, Donald O., 2016. "Job Displacement Insurance: A Policy Typology," IZA Discussion Papers 9865, Institute of Labor Economics (IZA).
    19. Stefan Groot & Henri de Groot, 2011. "Wage inequality in the Netherlands: Evidence, trends and explanations," CPB Discussion Paper 186.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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