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On Voters' Attitudes Towards Unemployment Insurance Subsidies across Regions: A Canadian Simulation

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Author Info

  • Stephane Pallage

    (UQAM)

  • Christian Zimmermann

    (University of Connecticut)

Abstract

The Canadian unemployment insurance program is designed to reflect the varying risk of joblessness across regions. Regions that are considered low-risk areas subsidize higher risk ones. A region's risk is typically proxied by its relative unemployment rate. We use a dynamic, heterogeneous-agent model calibrated to Canada to analyze voters preferences between a uniformly generous unemployment insurance and the current system with asymmetric generosity. We find that Canada's unusual unemployment insurance system is surprisingly close to what voters would choose in spite of the possibilities of moral hazard and self-insurance through asset build-up.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-34.

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Length: 27 pages
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:uct:uconnp:2004-34

Note: This paper was presented at the 2003 meeting of the European Society for Population Economics at NYU, the 2003 Montreal Macro Workshop, the 2003 meeting of the Society for Economic Dynamics in Paris, and the Midwest Macro Conference at Iowa State University. We gratefully acknowledge financial support from FCAR/FQRSC.
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Web page: http://www.econ.uconn.edu/
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Related research

Keywords: Unemployment insurance; moral hazard; shirking; heterogeneous agents; voting; redistribution.;

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References

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  1. Wang, C. & Williamson, S., 1995. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," GSIA Working Papers 1995-13, Carnegie Mellon University, Tepper School of Business.
  2. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "The survival of the welfare state," Economics Working Papers 603, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  4. Wang, Cheng & Williamson, Stephen D., 2002. "Moral Hazard, Optimal Unemployment Insurance and Experience Rating," Staff General Research Papers 10133, Iowa State University, Department of Economics.
  5. Joao Gomes & Jeremy Greenwood & Sergio Rebelo, 1997. "Equilibrium Unemployment," NBER Working Papers 5922, National Bureau of Economic Research, Inc.
  6. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
  7. Wang, Cheng & Williamson, Steve, 1996. "Unemployment Insurance with Moral Hazard in a Dynamic Economy," Staff General Research Papers 5088, Iowa State University, Department of Economics.
  8. Pallage, Stephane & Zimmermann, Christian, 2001. "Voting on Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  10. Andolfatto, David & Gomme, Paul, 1996. "Unemployment insurance and labor-market activity in Canada," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 47-82, June.
  11. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  12. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
  13. Hopenhayn, Hugo A & Nicolini, Juan Pablo, 1997. "Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 412-38, April.
  14. Stephane Pallage & Christian Zimmermann, 1999. "Heterogeneous Labor Markets and the Generosity Towards the Unemployed: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 88, CREFE, Université du Québec à Montréal.
  15. Hassler, John & Rodriguez Mora, Jose V., 1999. "Employment turnover and the public allocation of unemployment insurance," Journal of Public Economics, Elsevier, vol. 73(1), pages 55-83, July.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Optimal Unemployment Insurance over the Business Cycle
    by Christian Zimmermann in NEP-DGE blog on 2010-12-17 11:01:01
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Cited by:
  1. Andreas Pollak, 2005. "Optimal Unemployment Insurance and Voting," Computational Economics 0505002, EconWPA.
  2. Andreas Pollak, 2005. "Optimal Unemployment Insurance in a Search Model with Variable Human Capital," Computing in Economics and Finance 2005 324, Society for Computational Economics.
  3. Lars Osberg, 2011. "Why Did Unemployment Disappear from Official Macro-Economic Policy Discourse in Canada?," New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart, in: Fred Gorbet & Andrew Sharpe (ed.), New Directions for Intelligent Government in Canada: Papers in Honour of Ian Stewart, pages 127-162 Centre for the Study of Living Standards.
  4. Pollak, Andreas, 2007. "Optimal unemployment insurance with heterogeneous agents," European Economic Review, Elsevier, vol. 51(8), pages 2029-2053, November.

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