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Savings for Unemployment in Good or Bad Times: Options for Developing Countries

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Author Info

  • Robalino, David A.

    ()
    (World Bank)

  • Vodopivec, Milan

    ()
    (International School for Social and Business Studies, Celje, Slovenia)

  • Bodor, András

    ()
    (World Bank)

Abstract

The paper describes and evaluates unemployment insurance savings accounts (UISAs) – a relatively new and not well-known way of providing unemployment benefits. The UISAs reduce work disincentives by allowing recipients to keep their own unused unemployment contributions, and offer the possibility to extend coverage to informal sector workers. In addition, if integrated with mandatory pension systems (and even social pensions), UISAs can be rapidly deployed and at a low cost, thus becoming a realistic tool to protect workers from the effects of the financial crisis. Even during normal times, the integration with the pension system – and social security in general – would give more flexibility to individuals in the management of short and long term savings (i.e., pension wealth) while avoiding unnecessary administrative costs. The paper discusses issues related to incentives, redistribution, and viability, and outlines a policy framework for design and implementation. It argues that the UISAs system is especially attractive for developing countries, where the "self-policing" nature of the system is particularly important given a much larger informal sector and weaker administrative capacity in comparison to developed countries.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4516.

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Length: 41 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4516

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Keywords: unemployment insurance; unemployment insurance savings accounts; unemployment;

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References

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  1. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number heck04-1.
  2. Gonzalo Reyes Hartley & Jan C Van Ours & Milan Vodopivec, 2010. "Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile," Working Papers, Superintendencia de Pensiones 40, Superintendencia de Pensiones, revised Feb 2010.
  3. Robalino, David A. & Bodor, András, 2009. "On the financial sustainability of earnings-related pension schemes with ‘pay-as-you-go’ financing and the role of government-indexed bonds," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 8(02), pages 153-187, April.
  4. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2005. "Factor Adjustments After Deregulation: Panel Evidence from Colombian Plants," NBER Working Papers 11656, National Bureau of Economic Research, Inc.
  5. Adriana D. Kugler, 2004. "The Effect of Job Security Regulations on Labor Market Flexibility. Evidence from the Colombian Labor Market Reform," NBER Chapters, National Bureau of Economic Research, Inc, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 183-228 National Bureau of Economic Research, Inc.
  6. Gustavo Gonzaga, 2003. "Labor Turnover and Labor Legislation in Brazil," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  7. Florian Baumann & Nikolai Stähler, 2006. "Financing Unemployment Benefits: Dismissal versus Employment Taxes," LABOUR, CEIS, CEIS, vol. 20(3), pages 433-451, 09.
  8. Joseph Stiglitz & Jungyoll Yun, 2002. "Integration of Unemployment Insurance with Retirement Insurance," NBER Working Papers 9199, National Bureau of Economic Research, Inc.
  9. Piggot, John & Robalino, David & Jimenez-Martin, Sergi, 2008. "Incentive Effects of Retirement Income Transfers," MPRA Paper 12020, University Library of Munich, Germany.
  10. Kugler, Adriana D., 2005. "Wage-shifting effects of severance payments savings accounts in Colombia," Journal of Public Economics, Elsevier, Elsevier, vol. 89(2-3), pages 487-500, February.
  11. Martin Feldstein & Daniel Altman, 2007. "Unemployment Insurance Savings Accounts," NBER Chapters, National Bureau of Economic Research, Inc, in: Tax Policy and the Economy, Volume 21, pages 35-64 National Bureau of Economic Research, Inc.
  12. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. 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).
  14. B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," NBER Working Papers 11518, National Bureau of Economic Research, Inc.
  15. 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, University of Chicago Press, vol. 24(2), pages 351-378, April.
  16. Milan Vodopivec & Andreas W�rg�tter & Dhushyanth Raju, 2005. "Unemployment Benefit Systems in Central and Eastern Europe: A Review of the 1990s1," Comparative Economic Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 47(4), pages 615-651, December.
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Citations

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Cited by:
  1. Holzmann, Robert, 2010. "Bringing Financial Literacy and Education to Low and Middle Income Countries: The Need to Review, Adjust, and Extend Current Wisdom," IZA Discussion Papers 5114, Institute for the Study of Labor (IZA).
  2. David Robalino & Michael Weber, 2013. "Designing and implementing unemployment benefit systems in middle and low income countries: beyond risk-pooling vs savings," IZA Journal of Labor Policy, Springer, Springer, vol. 2(1), pages 1-20, December.
  3. Woo, Kye Lee, 2009. "Productivity increases in SMEs : with special emphasis on in-service training of workers in Korea," Social Protection Discussion Papers 51251, The World Bank.
  4. Ra, Young-Sun & Shim, Kyung Woo, 2009. "The Korean case study : past experience and new trends in training policies," Social Protection Discussion Papers 53696, The World Bank.
  5. Vodopivec, Milan, 2009. "Introducing Unemployment Insurance to Developing Countries," IZA Policy Papers, Institute for the Study of Labor (IZA) 6, Institute for the Study of Labor (IZA).
  6. François Gerard & Gustavo Gonzaga, 2013. "Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil," Textos para discussão, Department of Economics PUC-Rio (Brazil) 608, Department of Economics PUC-Rio (Brazil).
  7. Piggott, John & Sane, Renuka, 2009. "Indexing pensions," Social Protection Discussion Papers 52445, The World Bank.
  8. Chae, ChangKyun & Chung, Jaeho, 2009. "Pre-employment vocational education and training in Korea," Social Protection Discussion Papers 52186, The World Bank.
  9. Lord, Janet & Posarac, Aleksandra & Nicoli, Marco & Peffley, Karen & Mcclain-Nhlapo, Charlotte & Keogh, Mary, 2010. "Disability and international cooperation and development : a review of policies and practices," Social Protection Discussion Papers 56092, The World Bank.
  10. James, Estelle, 2009. "Rethinking survivor benefits," Social Protection Discussion Papers 52919, The World Bank.

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