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Unemployment Accounts and Employment Incentives

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  • Brown, Alessio J G
  • Orszag, Mike
  • Snower, Dennis J.

Abstract

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5692.

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Date of creation: Jun 2006
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Handle: RePEc:cpr:ceprdp:5692

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Keywords: employment; redistribution; unemployment; unemployment accounts; unemployment benefits;

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References

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  1. Milan Vodopivec, 2006. "Choosing a System of Unemployment Income Support: Guidelines for Developing and Transition Countries," World Bank Research Observer, World Bank Group, vol. 21(1), pages 49-89.
  2. Orszag, Mike & Snower, Dennis J., 1997. "Expanding the Welfare System: A Proposal for Reform," CEPR Discussion Papers 1674, C.E.P.R. Discussion Papers.
  3. 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.
  4. Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers : a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
  5. Feldstein, Martin & Altman, Dan, 2007. "Unemployment Insurance Savings Accounts," Scholarly Articles 2960185, Harvard University Department of Economics.
  6. A. Lans Bovenberg & Peter Birch Sørensen, . "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," EPRU Working Paper Series 03-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2003.
  7. Folster, Stefan, 1999. "Social Insurance Based on Personal Savings," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 5-18, March.
  8. Adriana D. Kugler, 1999. "The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform," Economics Working Papers 388, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
  10. Alfred Boss & Alessio J. G. Brown & Dennis J. Snower, 2008. "Beschäftigungskonten für Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(2), pages 139-155, 05.
  11. Goerke, Laszlo, 2007. "Unemployment Insurance Savings Accounts and Collective Wage Determination," IZA Discussion Papers 3141, Institute for the Study of Labor (IZA).
  12. Edi Karni, 1999. "Optimal Unemployment Insurance: A Survey," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 442-465, October.
  13. Miguel Jaramillo & Jaime Saavedra, 2005. "Severance Payment Programs in Latin America," Empirica, Springer, vol. 32(3), pages 275-307, 09.
  14. Robert Holzmann, 2005. "Reforming Severance Pay: Toward an Understanding of Program Rationale, Economic Impact and Reform Options," Empirica, Springer, vol. 32(3), pages 251-253, 09.
  15. Chia, Ngee Choon & Tsui, Albert K. C., 2003. "Life annuities of compulsory savings and income adequacy of the elderly in Singapore," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(01), pages 41-65, March.
  16. Peter AUER & Janine BERG & Ibrahim COULIBALY, 2005. "Is a stable workforce good for productivity?," International Labour Review, International Labour Organization, vol. 144(3), pages 319-343, 09.
  17. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  18. Stefan Fölster & Robert Gidehag & Mike Orszag & Dennis J. Snower, 2003. "Health Accounts and Other Welfare Accounts," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(3), pages 09-14, October.
  19. 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.
  20. Jude H. Esguerra & Mokoto Ogawa & Milan Vodopivec, 2001. "Income Support for the Unemployed : Options for the Philippines," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 38(2), pages 37-66, December.
  21. Shiller, Robert J., 2006. "Life-cycle personal accounts proposal for Social Security: An evaluation of President Bush's proposal," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 427-444, May.
  22. Esguerra, Jude H. & Ogawa, Makoto & Vodopivec, Milan, 2002. "Options of public income support for the unemployed in the Philippines and social protection," Social Protection Discussion Papers 25509, The World Bank.
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Citations

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Cited by:
  1. 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.
  2. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy.
  3. Setty, Ofer, 2012. "Unemployment accounts," MPRA Paper 38064, University Library of Munich, Germany.
  4. Fisher, Walter H. & Keuschnigg, Christian, 2011. "Life-Cycle Unemployment, Retirement, and Parametric Pension Reform," Economics Series 267, Institute for Advanced Studies.
  5. Egbert Jongen, 2009. "An analysis of individual accounts for the unemployment risk in the Netherlands," CPB Document 186, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Dennis J. Snower & Alessio J. G. Brown & Christian Merkl, 2009. "Globalization and the Welfare State: A Review of Hans-Werner Sinn's Can Germany Be Saved?," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 136-58, March.

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