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Incentive effects of unemployment insurance savings accounts: Evidence from Chile

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  • Hartley, Gonzalo Reyes
  • van Ours, Jan C.
  • Vodopivec, Milan

Abstract

The paper, the first one to empirically examine whether individual accounts internalize the cost of unemployment, estimates the determinants of job finding rates of unemployment benefit recipients under the Chilean program. This is a unique, innovative program that combines social insurance, provided via solidarity funding, with self-insurance in the form of unemployment insurance savings accounts (UISAs). The paper shows that beneficiaries who use solidarity funding are less likely to exit unemployment in early months than those relying on UISAs only. Moreover, job finding rates are found to be positively correlated with pre-separation UISA balances among those that use solidarity funding, but are found to be uncorrelated with balances for those relying on UISAs only. While the findings are consistent with the effects expected under the internalization of unemployment costs via UISAs, they do not pinpoint unambiguously the causal link, as alternative mechanisms may be responsible for the observed correlations, particularly selection into the use of UISAs.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 6 ()
Pages: 798-809

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Handle: RePEc:eee:labeco:v:18:y:2011:i:6:p:798-809

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Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Unemployment insurance; Unemployment duration; Savings accounts;

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References

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  1. Rafael Lalive & Jan Van Ours & Josef Zweim�ller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1009-1038.
  2. Peter Fredriksson & Bertil Holmlund, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," CESifo Working Paper Series 922, CESifo Group Munich.
  3. Matthew Blackwell & Stefano Iacus & Gary King & Giuseppe Porro, 2009. "cem: Coarsened exact matching in Stata," Stata Journal, StataCorp LP, vol. 9(4), pages 524-546, December.
  4. Abbring, Jaap H. & Berg, Gerard J. van den & Ours, Jan C. van, 1996. "The effect of unemployment insurance sanctions on the transition rate from unemployment to employment," Serie Research Memoranda 0038, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  5. Milan Vodopivec, 2004. "Income Support for the Unemployed : Issues and Options," World Bank Publications, The World Bank, number 14922, October.
  6. David MARGOLIS, 2008. "“Unemployment Insurance Versus Individual Unemployment Accounts and Transitions to Formal Versus Informal Sector Jobs”," Working Papers 2008-35, Centre de Recherche en Economie et Statistique.
  7. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April.
  8. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, 04.
  9. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," Papers 1997-25, Uppsala - Working Paper Series.
  10. Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
  11. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  12. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer, vol. 13(5), pages 565-585, September.
  13. Kugler, Adriana D., 2005. "Wage-shifting effects of severance payments savings accounts in Colombia," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 487-500, February.
  14. Vodopivec, Milan, 2008. "How Viable Are Unemployment Insurance Savings Accounts: Simulation Results for Slovenia," IZA Discussion Papers 3438, Institute for the Study of Labor (IZA).
  15. Stiglitz, Joseph E. & Yun, Jungyoll, 2005. "Integration of unemployment insurance with retirement insurance," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2037-2067, December.
  16. Bovenberg, A.L. & Hansen, M. & Sorensen, P.B., 2008. "Individual savings accounts for social insurance: Rationale and alternative designs," Open Access publications from Tilburg University urn:nbn:nl:ui:12-301941, Tilburg University.
  17. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  18. 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.
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  22. Orszag, Mike & Snower, Dennis J., 2002. "From Unemployment Benefits to Unemployment Accounts," IZA Discussion Papers 532, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. Tatsiramos, Konstantinos & van Ours, Jan C., 2012. "Labor Market Effects of Unemployment Insurance Design," IZA Discussion Papers 6950, Institute for the Study of Labor (IZA).
  2. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  3. Amil Petrin & Jagadeesh Sivadasan, 2011. "Estimating Lost Output from Allocative Inefficiency, with an Application to Chile and Firing Costs," NBER Working Papers 17373, National Bureau of Economic Research, Inc.
  4. Robalino, David A. & Vodopivec, Milan & Bodor, András, 2009. "Savings for Unemployment in Good or Bad Times: Options for Developing Countries," IZA Discussion Papers 4516, Institute for the Study of Labor (IZA).
  5. Haroon Bhorat & Sumayya Goga & David Tseng, 2013. "Unemployment Insurance in South Africa: A Descriptive Overview of Claimants and Claims," Working Papers 13160, University of Cape Town, Development Policy Research Unit.
  6. Fernando Alexandre & Luís Aguiar Conraria & Pedro Bação & Miguel Portela, 2011. "A Poupança em Portugal," GEMF Working Papers 2011-19, GEMF - Faculdade de Economia, Universidade de Coimbra.
  7. 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.
  8. Vodopivec, Milan, 2009. "Introducing Unemployment Insurance to Developing Countries," IZA Policy Papers 6, Institute for the Study of Labor (IZA).
  9. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance Pay Programs around the World: History, Rationale, Status, and Reforms," IZA Discussion Papers 5731, Institute for the Study of Labor (IZA).
  10. Nagler, Paula, 2013. "How unemployment insurance savings accounts affect employment duration: Evidence from Chile," MERIT Working Papers 039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  11. Eduardo Fajnzylber R. & Isabel Poblete H., 2013. "Analysis of the use of benefits under Chilean unemployment insurance," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 32-68, December.
  12. Isabel Poblete, 2011. "Análisis del uso de beneficios en el Seguro de Cesantía Chileno," Working Papers 51, Superintendencia de Pensiones, revised Oct 2011.
  13. Cristobal Huneeus & Silvia Leiva & Alejandro Micco, 2012. "Unemployment Insurance and Search Effort in Chile," Research Department Publications 4784, Inter-American Development Bank, Research Department.

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