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Civic Virtue and Labor Market Institutions

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Author Info
Yann Algan
Pierre Cahuc

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Abstract

We argue civic virtue plays a key role in explaining the design of public insurance against unemployment risks by solving moral hazard issues which hinder the efficiency of unemployment insurance. We show, in a simple model, that economies with stronger civic virtues are more prone to provide insurance through unemployment benefits rather than through job protection. We provide cross-country empirical evidence of a strong correlation between civic attitudes and the design of unemployment benefits and employment protection in OECD countries over the period 1980 to 2003. We then use an epidemiological approach to estimate the existence of a potential causal relationship from inherited civic virtue to labor market insurance institutions. (JEL: J41, J65, J68, Z13)

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Publisher Info
Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 1 (2009)
Issue (Month): 1 (January)
Pages: 111-45
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Handle: RePEc:aea:aejmac:v:1:y:2009:i:1:p:111-45

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  1. Aghion, Philippe & Algan, Yann & Cahuc, Pierre, 2008. "Can Policy Interact with Culture? Minimum Wage and the Quality of Labor Relations," IZA Discussion Papers 3680, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2009. "Regulation and Distrust," NBER Working Papers 14648, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Jean-Baptiste Michau, 2009. "Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment," CEP Discussion Papers dp0936, Centre for Economic Performance, LSE. [Downloadable!]
  4. Paolo Pinotti, 2009. "Trust and Regulation: Addressing a Cultural Bias," Temi di discussione (Economic working papers) 721, Bank of Italy, Economic Research Department. [Downloadable!]
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This page was last updated on 2009-12-22.

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