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Unemployment Accounts and Employment Incentives

  • Brown, Alessio J. G.

    ()

    (IZA)

  • Orszag, Mike

    ()

    (Towers Watson)

  • Snower, Dennis J.

    ()

    (Kiel Institute for the World Economy)

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high unemployment countries of Europe. Our results suggest that this policy reform would significantly change people’s employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2105.

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Length: 25 pages
Date of creation: Apr 2006
Date of revision:
Publication status: published in: European Journal of Political Economy, 2008, 24 (3), 587-604
Handle: RePEc:iza:izadps:dp2105
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  1. Alfred Boss & Alessio J. G. Brown & Dennis Snower, 2007. "Beschäftigungskonten für Deutschland," Kiel Working Papers 1325, Kiel Institute for the World Economy.
  2. Robert Holzmann, 2005. "Reforming Severance Pay: Toward an Understanding of Program Rationale, Economic Impact and Reform Options," Empirica, Springer, vol. 32(3), pages 251-253, 09.
  3. Lans Bovenberg & Peter Birch Sørensen, 2003. "Improving the Equity-Efficiency Trade-off: Mandatory Savings Accounts for Social Insurance," CESifo Working Paper Series 1041, CESifo Group Munich.
  4. Stefan Fölster & Robert Gidehag & Mike Orszag & Dennis J. Snower, 2003. "Health Accounts and Other Welfare Accounts," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(3), pages 09-14, October.
  5. Orszag, Mike & Snower, Dennis J., 1997. "Expanding the Welfare System: A Proposal for Reform," CEPR Discussion Papers 1674, C.E.P.R. Discussion Papers.
  6. Edi Karni, 1999. "Optimal Unemployment Insurance: A Survey," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 442-465, October.
  7. Chia, Ngee Choon & Tsui, Albert K. C., 2003. "Life annuities of compulsory savings and income adequacy of the elderly in Singapore," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(01), pages 41-65, March.
  8. Miguel Jaramillo & Jaime Saavedra, 2005. "Severance Payment Programs in Latin America," Empirica, Springer, vol. 32(3), pages 275-307, 09.
  9. Stiglitz, Joseph E. & Yun, Jungyoll, 2005. "Integration of unemployment insurance with retirement insurance," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2037-2067, December.
  10. Martin Feldstein & Daniel Altman, 2007. "Unemployment Insurance Savings Accounts," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 35-64 National Bureau of Economic Research, Inc.
  11. Adriana D. Kugler, 1999. "The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform," Economics Working Papers 388, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Esguerra, Jude H. & Ogawa, Makoto & Vodopivec, Milan, 2002. "Options of public income support for the unemployed in the Philippines and social protection," Social Protection Discussion Papers 25509, The World Bank.
  13. Feldstein, Martin & Altman, Dan, 2007. "Unemployment Insurance Savings Accounts," Scholarly Articles 2960185, Harvard University Department of Economics.
  14. J. Michael Orszag & Dennis J. Shower, 2000. "The Effectiveness of Employment Vouchers: A Simple Approach," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 385-419, November.
  15. Kugler, Adriana D., 2005. "Wage-shifting effects of severance payments savings accounts in Colombia," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 487-500, February.
  16. Milan Vodopivec, 2006. "Choosing a System of Unemployment Income Support: Guidelines for Developing and Transition Countries," World Bank Research Observer, World Bank Group, vol. 21(1), pages 49-89.
  17. Shiller, Robert J., 2006. "Life-cycle personal accounts proposal for Social Security: An evaluation of President Bush's proposal," Journal of Policy Modeling, Elsevier, vol. 28(4), pages 427-444, May.
  18. Jude H. Esguerra & Mokoto Ogawa & Milan Vodopivec, 2001. "Income Support for the Unemployed : Options for the Philippines," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 38(2), pages 37-66, December.
  19. Goerke, Laszlo, 2007. "Unemployment Insurance Savings Accounts and Collective Wage Determination," IZA Discussion Papers 3141, Institute for the Study of Labor (IZA).
  20. Orszag, Jonathan Michael & Snower, Dennis J., 2000. "The effectiveness of employment vouchers : a simple approach," Open Access Publications from Kiel Institute for the World Economy 2519, Kiel Institute for the World Economy (IfW).
  21. Folster, Stefan, 1999. "Social Insurance Based on Personal Savings," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 5-18, March.
  22. Peter AUER & Janine BERG & Ibrahim COULIBALY, 2005. "Is a stable workforce good for productivity?," International Labour Review, International Labour Organization, vol. 144(3), pages 319-343, 09.
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