Advanced Search
MyIDEAS: Login

Introducing Unemployment Insurance to Developing Countries

Contents:

Author Info

  • Vodopivec, Milan

    ()
    (World Bank)

Abstract

The paper identifies key labor market and institutional differences between developed and developing countries, analyzes how these differences affect the working of the standard, OECD-style unemployment insurance (UI) program, and derives a desirable design of unemployment benefit program in developing countries. It argues that these countries – faced by large informal sector, weak administrative capacity, large political risk, and environment prone to corruption – should tailor the OECD-style UI program to suit their circumstances. To minimize employment disincentives, to ensure affordability, and to minimize administration cots, such adaptations include: (i) relying on self-insurance (via unemployment insurance savings accounts – UISAs) as a main source of financing and complementing it by solidarity funding; (ii) simplifying monitoring of job-search behavior and labor market status, and even eliminating personal monitoring of continuing eligibility requirements in the early phases; (iii) keeping modest benefits both in terms of the replacement rate and potential benefit duration; (iv) drawing on employers’ and workers’ contributions as sources of financing; and (v) piggybacking on existing networks to administer benefits. Particularly attractive is the UISAs-cum-borrowing version that uses pension wealth as collateral, making the system proof to moral hazard and strategic behavior, and allowing it to be rapidly deployed, such as in response to the currently emerging global economic crises.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/pp6.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 6.

as in new window
Length: 40 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:iza:izapps:pp6

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

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

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Peracchi, Franco & Perotti, Valeria & Scarpetta, Stefano, 2007. "Informality and social protection : preliminary results from pilot surveys in Bulgaria and Colombia," Social Protection Discussion Papers 41541, The World Bank.
  2. Solange Berstein & Carmen Contreras & Evelyn Benvin, 2008. "Valoración del Seguro de Cesantía en Chile: Simulación de Beneficios con Datos Individuales," Working Papers 27, Superintendencia de Pensiones, revised Dec 2008.
  3. Paul L. Burgess & Jerry L. Kingston, 1976. "The impact of unemployment insurance benefits on reemployment success," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(1), pages 25-31, October.
  4. Kathleen P. Classen, 1977. "The effect of unemployment insurance on the duration of unemployment and subsequent earnings," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 438-444, July.
  5. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer, vol. 13(5), pages 565-585, September.
  6. F. Angel-Urdinola, Diego, 2008. "Can the Introduction of a Minimum Wage in FYR Macedonia Decrease the Gender Wage Gap?," Policy Research Working Paper Series 4795, The World Bank.
  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. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the old age : pensions, children and savings," Social Protection Discussion Papers 47101, The World Bank.
  9. James Heckman & Carmen Pages, 2003. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Working Papers 10129, National Bureau of Economic Research, Inc.
  10. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
  11. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Working Paper Series 2003:10, Uppsala University, Department of Economics.
  12. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  13. John M. Barron & Wesley Mellow, 1979. "Search Effort in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 389-404.
  14. Abidoye, Babatunde & Orazem, Peter F. & Vodopivec, Milan, 2009. "Firing cost and firm size : a study of Sri Lanka's severance pay system," Social Protection Discussion Papers 50671, The World Bank.
  15. Acemoglu, Daron & Shimer, Robert, 2000. "Productivity gains from unemployment insurance," European Economic Review, Elsevier, vol. 44(7), pages 1195-1224, June.
  16. David Card & Raj Chetty & Andrea Weber, 2007. "Cash-On-Hand and Competing Models of Intertemporal Behavior: New Evidence from the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1511-1560, November.
  17. Pedro Portugal & John T. Addison, 2008. "Six Ways To Leave Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 393-419, 09.
  18. Almeida, Rita & Carneiro, Pedro, 2008. "The return to firm investments in human capital," Social Protection Discussion Papers 44947, The World Bank.
  19. Reinhard Koman & Ulrich Schuh & Andrea Weber, 2005. "The Austrian Severance Pay Reform: Toward a Funded Pension Pillar," Empirica, Springer, vol. 32(3), pages 255-274, 09.
  20. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  21. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  22. Lawrence F. Katz & Bruce D. Meyer, 1990. "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," NBER Working Papers 2741, National Bureau of Economic Research, Inc.
  23. Mário Centeno, 2002. "The Match Quality Gains from Unemployment Insurance," Working Papers w200209, Banco de Portugal, Economics and Research Department.
  24. Almeida, Rita & Carneiro, Pedro, 2008. "Mandated benefits, employment, and inequality in a dual economy," Social Protection Discussion Papers 45051, The World Bank.
  25. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection Discussion Papers 25529, The World Bank.
  26. Macours, Karen & Vakis, Renos, 2010. "Seasonal Migration and Early Childhood Development," World Development, Elsevier, vol. 38(6), pages 857-869, June.
  27. 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, vol. 24(2), pages 351-378, April.
  28. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December.
  29. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  30. Kiefer,Nicholas M. & Neumann,George R., 1989. "Search Models and Applied Labor Economics," Cambridge Books, Cambridge University Press, number 9780521360531, November.
  31. Jonathan Gruber, 1999. "The Wealth of the Unemployed: Adequacy and Implications for Unemployment Insurance," NBER Working Papers 7348, National Bureau of Economic Research, Inc.
  32. Alan B. Krueger & Andreas Mueller, 2008. "Job Search and Unemployment Insurance: New Evidence from Time Use Data," Working Papers 1070, Princeton University, Department of Economics, Industrial Relations Section..
  33. Vodopivec, Milan & Dolenc, Primoz, 2008. "Live longer, work longer : making it happen in the labor market," Social Protection Discussion Papers 42471, The World Bank.
  34. Amin, Mohammad, 2007. "Labor regulation and employment in India's retail stores," Policy Research Working Paper Series 4314, The World Bank.
  35. Barr, Nicholas, 2001. "The Welfare State as Piggy Bank: Information, Risk, Uncertainty, and the Role of the State," OUP Catalogue, Oxford University Press, number 9780199246595.
  36. Christoph Basten & Andreas Fagereng & Kjetil Telle, 2012. "Cash-on-Hand and the Duration of Job Search: Quasi-Experimental Evidence from Norway," CESifo Working Paper Series 3898, CESifo Group Munich.
  37. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
  38. Vodopivec, Milan & Tong, Minna Hahn, 2008. "China : improving unemployment insurance," Social Protection Discussion Papers 44779, The World Bank.
  39. John Ham & Jan Svejnar & Katherine Terrell, 1998. "Unemployment and the Social Safety Net During Transitions to a Market Economy: Evidence from the Czech and Slovak Republic," William Davidson Institute Working Papers Series 169, William Davidson Institute at the University of Michigan.
  40. Arlene Holen, 1977. "Effects of unemployment insurance entitlement on duration and job search outcome," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 445-450, July.
  41. Lalive, Rafael & Zweimüller, Josef, 2002. "Benefit Entitlement and Unemployment Duration: The Role of Policy Endogeneity," IZA Discussion Papers 492, Institute for the Study of Labor (IZA).
  42. Almeida, Rita & Carneiro, Pedro, 2008. "Enforcement of labor regulation and firm size," Social Protection Discussion Papers 43675, The World Bank.
  43. Addison, John T. & Blackburn, McKinley L., 2000. "The effects of unemployment insurance on postunemployment earnings," Labour Economics, Elsevier, vol. 7(1), pages 21-53, January.
  44. Vodopivec, Milan & Worgotter, Andreas & Raju, Dhushyanth, 2003. "Unemployment benefit systems in Central and Eastern Europe : a review of the 1990s," Social Protection Discussion Papers 26307, The World Bank.
  45. Braithwaite , Jeanine & Mont , Daniel, 2008. "Disability and poverty : a survey of World Bank poverty assessments and implications," Social Protection Discussion Papers 42754, The World Bank.
  46. Orszag, Mike & Snower, Dennis J., 2002. "From Unemployment Benefits to Unemployment Accounts," IZA Discussion Papers 532, Institute for the Study of Labor (IZA).
  47. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
  48. Gonzalo Reyes Hartley & Jan C Van Ours & Milan Vodopivec, 2010. "Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile," Working Papers 40, Superintendencia de Pensiones, revised Feb 2010.
  49. Milan Vodopivec & Lilijana Madjar & Primoz Dolenc, 2009. "Non-performance of the Severance Pay Program in Slovenia," Financial Theory and Practice, Institute of Public Finance, vol. 33(1), pages 89-102.
  50. Michael F. Förster, 2000. "Trends and Driving Factors in Income Distribution and Poverty in the OECD Area," OECD Labour Market and Social Policy Occasional Papers 42, OECD Publishing.
  51. MacIsaac, Donna & Rama, Martin, 2001. "Mandatory severance pay : its coverage and effects in Peru," Policy Research Working Paper Series 2626, The World Bank.
  52. Blau, David M. & Robins, Philip K., 1986. "Job search, wage offers, and unemployment insurance," Journal of Public Economics, Elsevier, vol. 29(2), pages 173-197, March.
  53. Boheim, Rene & Taylor, Mark P., 2002. "The search for success: do the unemployed find stable employment?," Labour Economics, Elsevier, vol. 9(6), pages 717-735, December.
  54. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
  55. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-23, December.
  56. Tatsiramos, Konstantinos, 2004. "The Effect of Unemployment Insurance on Unemployment Duration and the Subsequent Employment Stability," IZA Discussion Papers 1163, Institute for the Study of Labor (IZA).
  57. 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).
  58. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  59. Avato, Johanna & Koettl, Johannes & Sabates-Wheeler, Rachel, 2009. "Definitions, good practices, and global estimates on the status of social protection for international migrants," Social Protection Discussion Papers 49172, The World Bank.
  60. Braithwaite, Jeanine & Carroll, Richard & Mont, Daniel & Peffley, Karen, 2008. "Disability and development in the World Bank : FY2000-2007," Social Protection Discussion Papers 45178, The World Bank.
  61. Almeida, Rita & Aterido, Reyes, 2008. "The incentives to invest in job training : do strict labor codes influence this decision?," Social Protection Discussion Papers 46189, The World Bank.
  62. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
  63. Simon Commander, 2010. "Dealing with employment risk: policy options for emerging markets," Human Development Research Papers (2009 to present) HDRP-2010-30, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
  64. Barrett , Christopher B & Carter , Michael R & Ikegami , Munenobu, 2008. "Poverty traps and social protection," Social Protection Discussion Papers 42752, The World Bank.
  65. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
  66. Bhattamishra, Ruchira & Barrett, Christopher B., 2010. "Community-Based Risk Management Arrangements: A Review," World Development, Elsevier, vol. 38(7), pages 923-932, July.
  67. 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.
  68. van Ours, Jan C. & Vodopivec, Milan, 2008. "Does reducing unemployment insurance generosity reduce job match quality?," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 684-695, April.
  69. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  70. 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, vol. 47(4), pages 615-651, December.
  71. Vodopivec, Milan & Arunatilake, Nisha, 2008. "Population aging and the labor market : the case of Sri Lanka," Social Protection Discussion Papers 44927, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

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," Social Protection Discussion Papers 56501, The World Bank.
  2. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Unemployment Compensation and the Allocation of Labor in Developing Countries," IZA Discussion Papers 7233, Institute for the Study of Labor (IZA).
  3. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  4. Chae, ChangKyun & Chung, Jaeho, 2009. "Pre-employment vocational education and training in Korea," Social Protection Discussion Papers 52186, The World Bank.
  5. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-23, December.
  6. Nagler, Paula, 2013. "How unemployment insurance savings accounts affect employment duration: Evidence from Chile," MERIT Working Papers 039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  7. Avato, Johanna & Koettl, Johannes & Sabates-Wheeler, Rachel, 2009. "Definitions, good practices, and global estimates on the status of social protection for international migrants," Social Protection Discussion Papers 49172, The World Bank.
  8. Piggott, John & Sane, Renuka, 2009. "Indexing pensions," Social Protection Discussion Papers 52445, The World Bank.
  9. Nagler, Paula, 2013. "How unemployment insurance savings accounts affect employment duration: Evidence from Chile," MERIT Working Papers 039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  10. 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.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izapps:pp6. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.