IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Unemployment Accounts

  • Ofer Setty: Tel Aviv University
Registered author(s):

    Unemployment Accounts (UA) are mandatory individual saving accounts that can be used by governments as an alternative to the Unemployment Insurance (UI) system. The goal of this paper is to study the welfare implications of a shift from the current UI system to a new UA system in the United States. The UA system works as follows. During employment, the worker is mandated to make deposits into the individual saving account. The worker is entitled to withdraw payments from this account only during unemployment. In contrast, UI is funded by a payroll tax and provides benefits for a limited duration. I build an heterogeneous agents, incomplete-markets life-cycle model, in which workers face income fluctuations and unemployment shocks. UI is modeled as a choice of a replacement rate, and a time limit of unemployment benefits. UA is modeled as a choice of a deposit rate into the account during employment and a withdrawal rate during unemployment. Qualitatively, a shift from UI to UA can lead to either a welfare gain or a welfare loss depending on the role of frictions and incentives in the model. This observation puts the paper at the nexus of the macroeconomic debate on the level of disutility from work. Quantitatively, for a plausible parameterization the shift from UI to UA leads to an average welfare gain of 0.9\% of lifetime consumption.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: https://economicdynamics.org/meetpapers/2011/paper_204.pdf
    Download Restriction: no

    Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 204.

    as
    in new window

    Length:
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:red:sed011:204
    Contact details of provider: Postal:
    Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

    Web page: http://www.EconomicDynamics.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Robert Shimer & Ivan Werning, 2008. "Liquidity and Insurance for the Unemployed," American Economic Review, American Economic Association, vol. 98(5), pages 1922-42, December.
    2. Greg Kaplan, 2011. "Inequality and the Lifecycle," PIER Working Paper Archive 11-014, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Williamson, Stephen D. & Wang, Cheng, 1999. "Moral Hazard, Optimal Unemployment Insurance, and Experience Rating," Working Papers 99-03, University of Iowa, Department of Economics.
    4. Edward C. Prescott & Richard Rogerson & Johanna Wallenius, 2009. "Lifetime Aggregate Labor Supply with Endogenous Workweek Length," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 23-36, January.
    5. Gary D. Hansen & Ayse Imrohoroglu, 1990. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," UCLA Economics Working Papers 583, UCLA Department of Economics.
    6. Narayana Kocherlakota, 2004. "Figuring out the Impact of Hidden Savings on Optimal Unemployment Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(3), pages 541-554, July.
    7. Ljungqvist, Lars & Sargent, Thomas J, 2007. "Do Taxes Explain European Employment? Indivisible Labour, Human Capital, Lotteries and Savings," CEPR Discussion Papers 6196, C.E.P.R. Discussion Papers.
    8. Robert E. Hall, 2009. "Reconciling Cyclical Movements in the Marginal Value of Time and the Marginal Product of Labor," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 281-323, 04.
    9. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
    10. Greg Kaplan & Giovanni L. Violante, 2009. "How Much Consumption Insurance Beyond Self-Insurance?," NBER Working Papers 15553, National Bureau of Economic Research, Inc.
    11. Huggett, Mark & Ventura, Gustavo & Yaron, Amir, 2006. "Human capital and earnings distribution dynamics," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 265-290, March.
    12. Brown, Alessio J G & Orszag, Mike & Snower, Dennis J., 2006. "Unemployment Accounts and Employment Incentives," CEPR Discussion Papers 5692, C.E.P.R. Discussion Papers.
    13. Browning, Martin & Crossley, Thomas F., 2001. "Unemployment insurance benefit levels and consumption changes," Journal of Public Economics, Elsevier, vol. 80(1), pages 1-23, April.
    14. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
    15. Nicola Pavoni & Giovanni L. Violante, 2005. "Optimal welfare-to-work programs," Discussion Paper / Institute for Empirical Macroeconomics 143, Federal Reserve Bank of Minneapolis.
    16. Claudio Michelacci & Hernan Ruffo, 2014. "Optimal Life Cycle Unemployment Insurance," EIEF Working Papers Series 1411, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2014.
    17. Abraham, Arpad & Pavoni, Nicola, 2004. "Efficient Allocations with Moral Hazard and Hidden Borrowing and Lending," Working Papers 04-05, Duke University, Department of Economics.
    18. Setty, Ofer, 2009. "Optimal Unemployment Insurance with Monitoring," MPRA Paper 18188, University Library of Munich, Germany.
    19. Christopher Carroll, 2005. "The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems," Economics Working Paper Archive 520, The Johns Hopkins University,Department of Economics.
    20. Rogerson, Richard & Wallenius, Johanna, 2009. "Micro and macro elasticities in a life cycle model with taxes," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2277-2292, November.
    21. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
    22. Lars Ljungqvist & Thomas J. Sargent, 2008. "Two Questions about European Unemployment," Econometrica, Econometric Society, vol. 76(1), pages 1-29, 01.
    23. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
    24. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
    25. Pavoni, Nicola, 2007. "On optimal unemployment compensation," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1612-1630, September.
    26. Atila Abdulkadiroglu & Burhanettin Kuruscu & Aysegul Sahin, 2002. "Unemployment Insurance and the Role of Self-Insurance," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 681-703, July.
    27. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:red:sed011:204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.