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Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile

  • Gonzalo Reyes Hartley
  • Jan C Van Ours
  • Milan Vodopivec

    ()

    (Studies Division, Chilean Pension Supervisor)

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..

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File URL: http://www.spensiones.cl/redirect/files/doctrab/DT00040.pdf
File Function: Revised version, 2010
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Paper provided by Superintendencia de Pensiones in its series Working Papers with number 40.

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Date of creation: Feb 2010
Date of revision: Feb 2010
Handle: RePEc:sdp:sdpwps:40
Contact details of provider: Web page: http://www.spensiones.cl/

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  1. Milan Vodopivec, 2010. "How Viable are Unemployment Insurance Savings Accounts? Simulation Results for Slovenia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(2), pages 225-247, June.
  2. Jaap H. Abbring & Gerard J. Berg & Jan C. Ours, 2005. "The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment," Economic Journal, Royal Economic Society, vol. 115(505), pages 602-630, 07.
  3. Folster, Stefan, 1999. "Social Insurance Based on Personal Savings," The Economic Record, The Economic Society of Australia, vol. 75(228), pages 5-18, March.
  4. Daniel S. Hamermesh & Daniel T. Slesnick, 1995. "Unemployment Insurance and Household Welfare: Microeconomic Evidence 1980-93," NBER Working Papers 5315, National Bureau of Economic Research, Inc.
  5. Milan Vodopivec, 2004. "Income Support for the Unemployed : Issues and Options," World Bank Publications, The World Bank, number 14922.
  6. Lalive, Rafael & van Ours, Jan C. & Zweimüller, Josef, 2004. "How Changes in Financial Incentives Affect the Duration of Unemployment," IZA Discussion Papers 1363, Institute for the Study of Labor (IZA).
  7. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(5), pages 565-585, September.
  8. Adriana Kugler, 2004. "Wage-Shifting Effects of Severance Payments Savings Accounts in Colombia," Working Papers 132, Barcelona Graduate School of Economics.
  9. Chetty, Raj, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Scholarly Articles 9751256, Harvard University Department of Economics.
  10. Fredriksson, Peter & Holmlund, Bertil, 2003. "Improving incentives in unemployment insurance: A review of recent research," Working Paper Series 2003:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. Vodopivec, Milan, 2008. "How Viable Are Unemployment Insurance Savings Accounts: Simulation Results for Slovenia," IZA Discussion Papers 3438, Institute for the Study of Labor (IZA).
  12. Orszag, Mike & Snower, Dennis J., 2002. "From Unemployment Benefits to Unemployment Accounts," IZA Discussion Papers 532, Institute for the Study of Labor (IZA).
  13. Dale T. Mortensen, 1977. "Unemployment Insurance and Job Search Decisions," ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  14. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  15. Solange Berstein & Eduardo Fajnzylber & Pamela Gana & Isabel Poblete, 2007. "Cinco Años de Funcionamiento del Seguro de Cesantía en Chile," Working Papers 23, Superintendencia de Pensiones, revised Dec 2007.
  16. A. Bovenberg & Martin Hansen & Peter Sørensen, 2008. "Individual savings accounts for social insurance: rationale and alternative designs," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(1), pages 67-86, February.
  17. Bover, O. & Arellano, M. & Bentolila, S., 1997. "Unemployment Duration, Benefit Duration, and the Business Cycle," Papers 9717, Centro de Estudios Monetarios Y Financieros-.
  18. David MARGOLIS, 2008. "“Unemployment Insurance Versus Individual Unemployment Accounts and Transitions to Formal Versus Informal Sector Jobs”," Working Papers 2008-35, Centre de Recherche en Economie et Statistique.
  19. Joseph Stiglitz & Jungyoll Yun, 2002. "Integration of Unemployment Insurance with Retirement Insurance," NBER Working Papers 9199, National Bureau of Economic Research, Inc.
  20. 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.
  21. Martin Feldstein & Daniel Altman, 1998. "Unemployment Insurance Savings Accounts," NBER Working Papers 6860, National Bureau of Economic Research, Inc.
  22. Ferrer, Ana & Riddell, W. Craig, 2011. "Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment," IZA Discussion Papers 5577, Institute for the Study of Labor (IZA).
  23. Matthew Blackwell & Stefano Iacus & Gary King & Giuseppe Porro, 2010. "CEM: Coarsened Exact Matching in Stata," BOS10 Stata Conference 8, Stata Users Group.
  24. Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
  25. Bovenberg, A.L. & Hansen, M. & Sorensen, P.B., 2008. "Individual savings accounts for social insurance : Rationale and alternative designs," Other publications TiSEM 72e236b0-ad63-4bea-a314-6, Tilburg University, School of Economics and Management.
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