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Unemployment Accounts and Employment Incentives

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  • Alessio J. G. Brown
  • J. Michael Orszag
  • Dennis J. Snower

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 e.ects 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 Kiel Institute for the World Economy in its series Kiel Working Papers with number 1274.

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Length: 22 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:kie:kieliw:1274

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

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References

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  1. 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, Cambridge University Press, vol. 2(01), pages 41-65, March.
  2. 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.
  3. Shiller, Robert J., 2006. "Life-cycle personal accounts proposal for Social Security: An evaluation of President Bush's proposal," Journal of Policy Modeling, Elsevier, Elsevier, vol. 28(4), pages 427-444, May.
  4. A. Lans Bovenberg & Peter Birch Sørensen, . "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 03-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2003.
  5. Orszag, Mike & Snower, Dennis J., 1997. "Expanding the Welfare System: A Proposal for Reform," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1674, C.E.P.R. Discussion Papers.
  6. Adriana Kugler, 1999. "The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform," International Tax and Public Finance, Springer, Springer, vol. 6(3), pages 389-410, August.
  7. 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.
  8. 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, Kiel Institute for the World Economy (IfW) 2519, Kiel Institute for the World Economy (IfW).
  9. Miguel Jaramillo & Jaime Saavedra, 2005. "Severance Payment Programs in Latin America," Empirica, Springer, Springer, vol. 32(3), pages 275-307, 09.
  10. Stiglitz, Joseph E. & Yun, Jungyoll, 2005. "Integration of unemployment insurance with retirement insurance," Journal of Public Economics, Elsevier, Elsevier, vol. 89(11-12), pages 2037-2067, December.
  11. Goerke, Laszlo, 2007. "Unemployment Insurance Savings Accounts and Collective Wage Determination," IZA Discussion Papers 3141, Institute for the Study of Labor (IZA).
  12. Folster, Stefan, 1999. "Social Insurance Based on Personal Savings," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 75(228), pages 5-18, March.
  13. Robert Holzmann, 2005. "Reforming Severance Pay: Toward an Understanding of Program Rationale, Economic Impact and Reform Options," Empirica, Springer, Springer, vol. 32(3), pages 251-253, 09.
  14. Alfred Boss & Alessio J. G. Brown & Dennis J. Snower, 2008. "Beschäftigungskonten für Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 9(2), pages 139-155, 05.
  15. Edi Karni, 1999. "Optimal Unemployment Insurance: A Survey," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 442-465, October.
  16. 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, Ifo Institute for Economic Research at the University of Munich, vol. 1(3), pages 09-14, October.
  17. 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.
  18. Peter AUER & Janine BERG & Ibrahim COULIBALY, 2005. "Is a stable workforce good for productivity?," International Labour Review, International Labour Organization, International Labour Organization, vol. 144(3), pages 319-343, 09.
  19. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
  20. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  21. Milan Vodopivec, 2006. "Choosing a System of Unemployment Income Support: Guidelines for Developing and Transition Countries," World Bank Research Observer, World Bank Group, World Bank Group, vol. 21(1), pages 49-89.
  22. Feldstein, Martin & Altman, Dan, 2007. "Unemployment Insurance Savings Accounts," Scholarly Articles 2960185, Harvard University Department of Economics.
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Citations

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Cited by:
  1. Keuschnigg, Christian & Fisher, Walter, 2011. "Life-Cycle Unemployment, Retirement and Parametric Pension Reform," Economics Working Paper Series 1119, University of St. Gallen, School of Economics and Political Science.
  2. Egbert Jongen, 2009. "An analysis of individual accounts for the unemployment risk in the Netherlands," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 186, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
  4. 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, American Economic Association, vol. 47(1), pages 136-58, March.
  5. Alessio J. G. Brown & Dennis Snower, 2009. "Incentives and Complementarities of Flexicurity," Kiel Working Papers 1526, Kiel Institute for the World Economy.
  6. Ofer Setty: Tel Aviv University, 2011. "Unemployment Accounts," 2011 Meeting Papers 204, Society for Economic Dynamics.

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