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Identifying Risk-based Selection in Social Insurance: New Approaches and Findings

Author

Listed:
  • Mette Ejrnæs

    (University of Copenhagen)

  • Stefan Hochguertel

    (Vrije Universiteit Amsterdam)

Abstract

We study risk-based selection into a voluntary unemployment insurance (UI) scheme. To disentangle behavioral effects from selection, we exploit variation in the sign-up induced by an early retirement scheme embedded into the UI system. We combine an event study with a difference-in-difference approach applied to Danish register data to quantify the selection. We find that individuals who sign up for UI are negatively selected in terms of subsequent unemployment. However, we find important heterogeneity across education and gender. In addition, life cycle events (such as buying a first home) point to effects consistent with dynamic selection on moral hazard.

Suggested Citation

  • Mette Ejrnæs & Stefan Hochguertel, 2022. "Identifying Risk-based Selection in Social Insurance: New Approaches and Findings," Tinbergen Institute Discussion Papers 22-040/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20220040
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; insurance; selection;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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