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Integration of Unemployment Insurance with Retirement Insurance

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  • Joseph Stiglitz
  • Jungyoll Yun

Abstract

This paper analyzes a social insurance system that integrates unemployment insurance with a pension program through an individual account, allowing workers to borrow against their future wage income to finance consumption during an unemployment episode and thus improving their search incentives while reducing risks. This paper identifies factors which determine the optimal degree of integration. A fully integrated system is one in which no reliance is placed at all on a separate tax-funded unemployment insurance program. We show that when the duration of unemployment is very short compared to the period of employment or retirement, the optimal system involves an exclusive reliance on pension-funded self-insurance. This system imposes a negligible risk burden for workers while avoiding attenuating search incentives. We also argue that a joint integration of several social insurance programs with a pension program through an individual account is desirable unless the risks are perfectly correlated to each other.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9199.

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Date of creation: Sep 2002
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Publication status: published as Stiglitz, Joseph E. and Jungyoll Yun. "Integration Of Unemployment Insurance With Retirement Insurance," Journal of Public Economics, 2005, v89(11-12,Dec), 2037-2067.
Handle: RePEc:nbr:nberwo:9199

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  1. Joseph Stiglitz, 1999. "Taxation, Public Policy, and Dynamics of Unemployment," International Tax and Public Finance, Springer, Springer, vol. 6(3), pages 239-262, August.
  2. Richard Arnott & Joseph Stiglitz, 1986. "The Welfare Economics of Moral Hazard," Working Papers, Queen's University, Department of Economics 635, Queen's University, Department of Economics.
  3. Martin Feldstein & Daniel Altman, 2007. "Unemployment Insurance Savings Accounts," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 35-64 National Bureau of Economic Research, Inc.
  4. Daniel S. Hamermesh, 1980. "Social Insurance and Consumption: An Empirical Inquiry," NBER Working Papers 0600, National Bureau of Economic Research, Inc.
  5. Arnott, Richard J & Stiglitz, Joseph E, 1988. " The Basic Analytics of Moral Hazard," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 90(3), pages 383-413.
  6. Arnott, Richard J & Stiglitz, Joseph E, 1985. "Labor Turnover, Wage Structures, and Moral Hazard: The Inefficiency of Competitive Markets," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 3(4), pages 434-62, October.
  7. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  8. Rasmus Lentz & Torben Tranaes, 2001. "Job Search and Savings: Wealth Effects and Duration Dependence," CESifo Working Paper Series 461, CESifo Group Munich.
  9. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers, California Los Angeles - Applied Econometrics 21, California Los Angeles - Applied Econometrics.
  10. Flemming, J. S., 1978. "Aspects of optimal unemployment insurance : Search, leisure, savings and capital market imperfections," Journal of Public Economics, Elsevier, Elsevier, vol. 10(3), pages 403-425, December.
  11. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(2), pages 229-64, May.
  12. Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 503, Cowles Foundation for Research in Economics, Yale University.
  13. Arnott, Richard & Greenwald, Bruce & Stiglitz, Joseph E., 1994. "Information and economic efficiency," Information Economics and Policy, Elsevier, Elsevier, vol. 6(1), pages 77-82, March.
  14. James Costain, 1997. "Unemployment insurance with endogenous search intensity and precautionary saving," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 243, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
  16. Narayana Kocherlakota, 2010. "Figuring out the impact of hidden savings on optimal unemployment insuranc," Levine's Working Paper Archive 506439000000000291, David K. Levine.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Is There Room for Compromise on Unemployment Insurance?
    by Matt Mitchell in Neighborhood Effects on 2010-12-01 22:00:05
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