Voluntary Public Unemployment Insurance

Donald Parsons, Torben Tranaes () and Helene Lilleør

No 8783, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Denmark has drawn much attention for its active labor market policies, but is almost unique in offering a voluntary public unemployment insurance program requiring a significant premium payment. A safety net program – a less generous, means-tested social assistance plan – completes the system. The voluntary system emerged as one of many European "Ghent systems," essentially government subsidized trade union plans, but has since lost many key features of such plans. We assess system performance using a 10% sample of the Danish population drawn from administrative data. Coverage rates for the voluntary programs are surprisingly high, approximately 80 percent of the workforce, but the program has predictable selection effects, including adverse selection across risk classes and a substantial charity hazard (low coverage among those with generous treatment under the safety net program). The latter appears to explain the difficulty of shifting to a compulsory system; redistribution effects would be concentrated among the previously uninsured in the lowest decile of the income distribution, a problem in the Danish welfare state.

Keywords: unemployment insurance; social assistance; early retirement (search for similar items in EconPapers)
JEL-codes: H4 J65 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2015-01
New Economics Papers: this item is included in nep-ias, nep-lab, nep-lma and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Voluntary Public Unemployment Insurance (2015)
Working Paper: Voluntary Public Unemployment Insurance (2003)
Working Paper: Voluntary Public Unemployment Insurance (2003)
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