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Civic Virtue and Labor Market Institutions

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  • Pierre Cahuc
  • Yann Algan

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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Bibliographic 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

Note: DOI: 10.1257/mac.1.1.111
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  1. Paola Giuliano, 2005. "Living Arrangements in Western Europe: Does Cultural Origin Matter?," 2005 Meeting Papers, Society for Economic Dynamics 189, Society for Economic Dynamics.
  2. Pierre Cahuc & Yann Algan, 2005. "The Roots of Low European Employment : Family Culture?," Sciences Po publications 1683, Sciences Po.
  3. Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1479-96, December.
  4. Lindbeck, Assar & Nyberg, Sten, 2001. "Raising Children To Work Hard: Altruism, Work Norms And Social Insurance," Seminar Papers, Stockholm University, Institute for International Economic Studies 691, Stockholm University, Institute for International Economic Studies.
  5. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  6. Alessandra Fogli & Raquel Fernandez, 2005. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 05-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  7. Guido Tabellini, 2005. "Culture and Institutions: Economic Development in the Regions of Europe," CESifo Working Paper Series 1492, CESifo Group Munich.
  8. Andrea Ichino & Giovanni Maggi, 1999. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," NBER Working Papers 7415, National Bureau of Economic Research, Inc.
  9. Raquel Fernández & Alessandra Fogli & Claudia Olivetti, 2004. "Mothers and Sons: Preference Formation and Female Labor Force Dynamics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(4), pages 1249-1299, November.
  10. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(5), pages 937-57, October.
  11. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  12. Burdett, Kenneth & Wright, Randall, 1989. "Optimal firm size, taxes, and unemployment," Journal of Public Economics, Elsevier, Elsevier, vol. 39(3), pages 275-287, August.
  13. W. Henry Chiu & Edi Karni, 1998. "Endogenous Adverse Selection and Unemployment Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(4), pages 806-827, August.
  14. repec:spo:wpecon:info:hdl:2441/8808 is not listed on IDEAS
  15. Kiander, Jaakko, 1993. "Endogenous unemployment insurance in a monopoly union model when job search matters," Journal of Public Economics, Elsevier, Elsevier, vol. 52(1), pages 101-115, August.
  16. repec:spo:wpecon:info:hdl:2441/8810 is not listed on IDEAS
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