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Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment

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  • Jean-Baptiste Michau

Abstract

This paper emphasizes the two-way causality between the provision of unemployment insurance and the cultural transmission of work ethic. Values affect the size of the moral-hazard problem and, hence, the policy to be implemented. Conversely, when parents rationally choose how much effort to exert to raise their children to work hard, they form expectations on the policy that will be implemented by the next generation. In this context, I determine the dynamics of preferences across generations and show that the different cultural traits, i.e. high and low work ethics, are complementary. The model could generate a lag between the introduction of unemployment insurance and a deterioration of the work ethic. Relying on a calibration, I argue that it can account for a substantial fraction of the history of European unemployment since World War II. As this explanation is compatible with the co- existence of generous unemployment insurance and low unemployment in the 1950s and 1960s, it could be seen as an alternative to the dominant story that relies on the occurrence of large shocks since the 1970s. Supportive empirical evidence is provided.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0936.

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Date of creation: Jun 2009
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Handle: RePEc:cep:cepdps:dp0936

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Keywords: cultural transmission; European unemployment; unemployment insurance; work ethic;

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  1. Unemployment insurance and work ethic
    by Economic Logician in Economic Logic on 2009-07-23 18:49:00
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Cited by:
  1. Mo, Pak Hung, 2011. "Minimum Wage Legislation and Economic Growth: Channels and Effects," MPRA Paper 35820, University Library of Munich, Germany.
  2. Urban Sila, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28684, London School of Economics and Political Science, LSE Library.
  3. Corneo, Giacomo, 2013. "Work Norms, Social Insurance and the Allocation of Talent," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 405, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Corneo, Giacomo, 2013. "Work norms, social insurance and the allocation of talent," Discussion Papers 2013/12, Free University Berlin, School of Business & Economics.
  5. Doepke, Matthias & Zilibotti, Fabrizio, 2013. "Culture, Entrepreneurship, and Growth," IZA Discussion Papers 7459, Institute for the Study of Labor (IZA).
  6. Nicholas Oulton & Ana Rincon-Aznar, 2009. "Rates of return and alternative measures of capital input: 14 countries and 10 branches, 1971-2005," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28687, London School of Economics and Political Science, LSE Library.
  7. repec:hal:wpaper:halshs-00564898 is not listed on IDEAS
  8. Grégory Ponthière, 2010. "Mortality, family and lifestyles," PSE Working Papers halshs-00564898, HAL.

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