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Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile

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  • Reyes, Gonzalo
  • van Ours, Jan C
  • Vodopivec, Milan

Abstract

This study examines the determinants of job-finding rates of unemployment benefit recipients under the Chilean program. This is a unique, innovative program that combines social insurance through a solidarity fund (SF) with self-insurance in the form of unemployment insurance savings accounts (UISAs) - so as to mitigate the moral hazard problem of traditional unemployment insurance programs. Our study is the first one to empirically investigate whether UISAs improve work incentives. We find that for beneficiaries using the SF, the pattern of job finding rates over the duration of unemployment is consistent with moral hazard effects, while for beneficiaries relying on UISAs, the pattern is free of such effects. We also find that for benefit recipient not entitled to use the SF, the amount of accumulation on the UISA does not affect the exit rate from unemployment, suggesting that such individuals internalize the costs of unemployment benefits. Our results provide strong support to the idea that UISAs can improve work incentives.

Suggested Citation

  • Reyes, Gonzalo & van Ours, Jan C & Vodopivec, Milan, 2010. "Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile," CEPR Discussion Papers 7632, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7632
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Paula Nagler, 2013. "How unemployment insurance savings accounts affect employment duration: evidence from Chile," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-25, December.
    2. Amil Petrin & Jagadeesh Sivadasan, 2013. "Estimating Lost Output from Allocative Inefficiency, with an Application to Chile and Firing Costs," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 286-301, March.
    3. Robalino, David & Vodopivec, Milan & Bodor, Andras, 2009. "Savings for unemployment in good or bad times : options for developing countries," Social Protection and Labor Policy and Technical Notes 50320, The World Bank.
    4. Ferrer, Ana M. & Riddell, W. Craig, 2009. "Unemployment insurance savings accounts in Latin America : overview and assessment," Social Protection and Labor Policy and Technical Notes 49173, The World Bank.
    5. Robert Holzmann & Johannes Koettl, 2015. "Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, and Issues," CESifo Economic Studies, CESifo, vol. 61(2), pages 377-415.
    6. Konstantinos Tatsiramos & Jan C. Ours, 2014. "Labor Market Effects Of Unemployment Insurance Design," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 284-311, April.
    7. Carlos Alberto Foronda Rojas & Andrea Alcaráz, 2015. "Estimation and characteristics of unemployment duration in Bolivia," Investigación & Desarrollo 0215, Universidad Privada Boliviana, revised Jun 2015.
    8. Milan Vodopivec, 2013. "Introducing unemployment insurance to developing countries," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    9. François Gerard & Gustavo Gonzaga, 2011. "Unemployment Insurance in Developing Countries: The Case of Brazil," Textos para discussão 593, Department of Economics PUC-Rio (Brazil).
    10. Holzmann, Robert & Pouget, Yann & Vodopivec, Milan & Weber, Michael, 2011. "Severance pay programs around the world : history, rationale, status, and reforms," Social Protection and Labor Policy and Technical Notes 62726, The World Bank.
    11. Keuschnigg, Christian & Fisher, Walter, 2011. "Life-Cycle Unemployment, Retirement and Parametric Pension Reform," Economics Working Paper Series 1119, University of St. Gallen, School of Economics and Political Science.
    12. Isabel Poblete, 2011. "Análisis del uso de beneficios en el Seguro de Cesantía Chileno," Working Papers 51, Superintendencia de Pensiones, revised Oct 2011.
    13. Eduardo Fajnzylber R. & Isabel Poblete H., 2013. "Analysis of the use of benefits under Chilean unemployment insurance," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 32-68, December.
    14. repec:hrv:faseco:34330197 is not listed on IDEAS
    15. Nagler, Paula, 2015. "The impact of unemployment insurance savings accounts on subsequent employment quality," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Haroon Bhorat & Sumayya Goga & David Tseng, 2013. "Unemployment Insurance in South Africa: A Descriptive Overview of Claimants and Claims," Working Papers 13160, University of Cape Town, Development Policy Research Unit.
    17. Nagler P., 2013. "How unemployment insurance savings accounts affect employment duration : evidence from Chile," MERIT Working Papers 039, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Fernando Alexandre & Luís Aguiar Conraria & Pedro Bação & Miguel Portela, 2011. "A Poupança em Portugal," GEMF Working Papers 2011-19, GEMF, Faculty of Economics, University of Coimbra.

    More about this item

    Keywords

    savings account; unemployment duration; unemployment insurance;

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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