Unemployment Accounts and Employment Incentives

26 Pages Posted: 4 Aug 2006

See all articles by Alessio J.G. Brown

Alessio J.G. Brown

Kiel Institute for the World Economy

J. Michael Orszag

Willis Towers Watson - Reigate (Surrey Office); Institute for the Study of Labor (IZA)

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2006

Abstract

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.

Keywords: Unemployment benefits, unemployment accounts, redistribution, employment, unemployment

JEL Classification: I38, J22, J32, J38, J64, J65, J68

Suggested Citation

Brown, Alessio J.G. and Orszag, J. Michael and Snower, Dennis J., Unemployment Accounts and Employment Incentives (June 2006). CEPR Discussion Paper No. 5692, Available at SSRN: https://ssrn.com/abstract=921874

Alessio J.G. Brown

Kiel Institute for the World Economy ( email )

D-24105 Kiel, Schleswig-Hosltein
Germany
+49 431 8814 259 (Phone)
+49 431 8814 501 (Fax)

HOME PAGE: http://www.ifw-kiel.de/

J. Michael Orszag

Willis Towers Watson - Reigate (Surrey Office) ( email )

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+44 1737 241496 (Fax)

Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

Dennis J. Snower (Contact Author)

University of Kiel - Institute for World Economics (IfW) ( email )

Duesternbrooker Weg 120
D-24118 Kiel
Germany
+49+431-8814-235 (Phone)

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany