Kiel Working Papers, Kiel Institute for World Economics
No 1274:
Unemployment Accounts and Employment Incentives
Alessio J. G. Brown, J. Michael Orszag and Dennis J. Snower
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 e.ects 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; (follow links to similar papers)
JEL-Codes: I38,; J22,; J32,; J38,; J64,; J65,; J68; (follow links to similar papers)
22 pages, April 2006
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