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Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment

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  • Jean-Baptiste Michau

Abstract

This paper emphasizes the two-way causality between the provision of unemployment insurance and the cultural transmission of work ethic. Values affect the size of the moral-hazard problem and, hence, the policy to be implemented. Conversely, when parents rationally choose how much effort to exert to raise their children to work hard, they form expectations on the policy that will be implemented by the next generation. In this context, I determine the dynamics of preferences across generations and show that the different cultural traits, i.e. high and low work ethics, are complementary. The model could generate a lag between the introduction of unemployment insurance and a deterioration of the work ethic. Relying on a calibration, I argue that it can account for a substantial fraction of the history of European unemployment since World War II. As this explanation is compatible with the co- existence of generous unemployment insurance and low unemployment in the 1950s and 1960s, it could be seen as an alternative to the dominant story that relies on the occurrence of large shocks since the 1970s. Supportive empirical evidence is provided.

Suggested Citation

  • Jean-Baptiste Michau, 2009. "Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment," CEP Discussion Papers dp0936, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0936
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    1. Unemployment insurance and work ethic
      by Economic Logician in Economic Logic on 2009-07-23 23:49:00

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    1. Oulton, Nicholas & Rincon-Aznar, Ana, 2009. "Rates of return and alternative measures of capital input: 14 countries and 10 branches, 1971-2005," LSE Research Online Documents on Economics 28687, London School of Economics and Political Science, LSE Library.
    2. Corneo, Giacomo, 2013. "Work norms, social insurance and the allocation of talent," Journal of Public Economics, Elsevier, vol. 107(C), pages 79-92.
    3. Grégory Ponthière, 2010. "Mortality, family and lifestyles," Working Papers halshs-00564898, HAL.
    4. Gregory Ponthiere, 2011. "Mortality, Family and Lifestyles," Journal of Family and Economic Issues, Springer, vol. 32(2), pages 175-190, June.
    5. Mo, Pak Hung, 2011. "Minimum Wage Legislation and Economic Growth: Channels and Effects," MPRA Paper 35820, University Library of Munich, Germany.
    6. Sila, Urban, 2009. "Can family-support policies help explain differences in working hours across countries?," LSE Research Online Documents on Economics 28684, London School of Economics and Political Science, LSE Library.
    7. Doepke, Matthias & Zilibotti, Fabrizio, 2014. "Culture, Entrepreneurship, and Growth," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 1-48 Elsevier.
    8. Klasing, Mariko J., 2014. "Cultural change, risk-taking behavior and implications for economic development," Journal of Development Economics, Elsevier, vol. 110(C), pages 158-169.

    More about this item

    Keywords

    cultural transmission; European unemployment; unemployment insurance; work ethic;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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