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A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

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  • Christina D. Romer
  • David H. Romer

Abstract

This paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance against pandemic income losses that people would like to have had. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions.

Suggested Citation

  • Christina D. Romer & David H. Romer, 2021. "A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay," NBER Working Papers 29419, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:29419
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    Cited by:

    1. Jonathan A. Parker & Jake Schild & Laura Erhard & David S. Johnson, 2022. "Economic Impact Payments and Household Spending during the Pandemic," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 53(2 (Fall)), pages 81-156.
    2. Christina D. Romer, 2022. "Lessons from Fiscal Policy in the Pandemic: The ODE Distinguished Economist Award Lecture," The American Economist, Sage Publications, vol. 67(2), pages 164-182, October.
    3. Jeffrey Clemens & Philip G. Hoxie & Stan Veuger, 2022. "Was Pandemic Fiscal Relief Effective Fiscal Stimulus? Evidence from Aid to State and Local Governments," NBER Working Papers 30168, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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