ABSTRACT : Unemployment insurance and job protection regulations provide assistance to those who face unemployment. Unemployment insurance seems more desirable, since it does not harm flexibility in the labour markets, but it entails a moral hazard risk. Making the unemployment insurance voluntary and private would create more problems related mostly to the nature of the unemployment risk and to asymmetric information. Instead, it would sound more desirable to improve the design of unemployment insurance in a way that it would protect the individuals without harming flexibility and incentives for job seekers and job owners. Against this background, Unemployment Insurance Savings Accounts (UISA) have been proposed by a number of scholars. This paper provides a literature review of the theoretical properties of the UISA and analyses the current experience of Chile. It then investigates the similarities and differences between this UISA system and the severance payment savings account reforms recently implemented in Austria and Colombia. In light of both the theoretical and the practical perspectives, the UISA seem a valuable option, since they provide insurance without excessively harming the incentives of the individuals, offering security without impeding the flexibility in the labour markets.
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Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number
1136.
Find related papers by JEL classification: H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
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