What shapes the generosity of short- and long-term benefits? A political economy approach
AbstractDegressivity of unemployment benefits is a major feature of social protection in most industrialised countries: the replacement rate (the ratio between the level of welfare benefits and the previous income) typically declines with the length of the unemployment spell. Moreover degressivity of unemployment benefits has significant distributive effects as the risk of long-term unemployment varies from one individual to another. This paper proposes a formal model of political support for unemployment insurance that takes into account the decrease in the level of benefits over time. A discount factor is introduced that diminishes the level of benefits for long-term unemployed. The main predictions of our model are the following: i) Unemployment insurance size negatively depends on both the average level and the heterogeneity of unemployment risk ii) The degressivity increases with the average level and the heterogeneity in the individual level of employability defined as the probability of finding a job when unemployed. These predictions are then tested using a dataset of 24 OECD countries. Empirical results are consistent with the model.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 13027.
Length: 58 pages
Date of creation: Mar 2013
Date of revision:
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Long-term unemployment; political economy; replacement rate; risk heterogeneity; unemployment insurance; voting behaviour.;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-IAS-2013-04-06 (Insurance Economics)
- NEP-POL-2013-04-06 (Positive Political Economics)
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.:
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