Unemployment Insurance in Chile: Does it Stabilize the Business Cycle?
AbstractWe explore the stabilizing effects of unemployment insurance in Chile. A dynamic general equilibrium model is calibrated for the Chilean economy for the 1960-2000 period. We assume that the economy is subject to exogenous technological shocks and that a fraction of the population is liquidity constrained. Our main conclusion is that unemployment insurance has some stabilizing effect on the business cycle, especially on consumption, but that this effect is of the second order of magnitude. We also find that the larger the fraction of the population that is liquidity constrained, the more likely the program is welfare improving. Our results suggest that the objective of stabilizing the business cycle would be more efficiently achieved using alternative instruments.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 302.
Date of creation: 2005
Date of revision:
Publication status: Published as "Unemployment Insurance in Chile: Does it Stabilize the Business Cycle?", Journal of Policy Modeling, Vol. 99, NÂ° 3, pp. 473-488, 2007.
Unemployment insurance; business cycle;
Other versions of this item:
- Cerda, Rodrigo & Vergara, Rodrigo, 2007. "Unemployment insurance in Chile: Does it stabilize the business cycle?," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 473-488.
- Rodrigo Cerda & Rodrigo Vergara, 2006. "Unemployment Insurance in Chile: Does it Stabilize the Business Cycle?," Working Papers 17, Superintendencia de Pensiones, revised May 2007.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
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