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A policy for the size of individual unemployment accounts

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  • Rubén Castro

    (Universidad Técnica Federico Santa Maria)

  • Michael Weber

    (World Bank)

  • Gonzalo Reyes

    (World Bank)

Abstract

Individual unemployment accounts (IUAs) attenuate the moral hazard attached to unemployment insurance. However, the available literature provides no policy recommendation about what percentage of the contributions should go to IUAs. We propose criteria of actuarial neutrality and use a simple job search model to argue that a sizable proportion of the contributions could go to IUAs without changing benefits and contribution rates, and therefore not negatively affecting well-being. We derive this result from a model, first, and then use simulations to show that it also holds in more realistic settings and different labor market dynamics.

Suggested Citation

  • Rubén Castro & Michael Weber & Gonzalo Reyes, 2018. "A policy for the size of individual unemployment accounts," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-11, December.
    • Handle: RePEc:spr:izalpo:v:7:y:2018:i:1:d:10.1186_s40173-018-0102-z
    DOI: 10.1186/s40173-018-0102-z
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    References listed on IDEAS

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    Cited by:

    1. Rubén Castro, 2023. "Optimal unemployment accounts based on observable parameters," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 48(2), pages 260-270, September.

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    More about this item

    Keywords

    Social security; Unemployment insurance; Unemployment accounts; Moral hazard;
    All these keywords.

    JEL classification:

    • 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
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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