A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay

Christina Romer and David Romer

No 29419, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper considers fiscal policy during the pandemic through the lens of optimal social insurance. We develop a simple framework to analyze how government taxes and transfers could mimic the insurance against pandemic income losses that people would like to have had. Permutations of the framework provide insight into how unemployment insurance should be structured, when and how much hazard pay is called for, and whether fiscal policy should aim just to redistribute income or also to stimulate aggregate demand during a pandemic. When we use the insights from the model to evaluate unemployment insurance measures taken during the pandemic, we find that some, but far from all, of the implications of the social insurance framework were followed. In the case of hazard pay, we find that the proposal for a national program (the never-implemented HEROES Act) was both broader and more generous than a social insurance perspective would call for. We suggest that the social insurance perspective on fiscal policy is likely to become increasingly relevant as pandemics and climate-related natural disasters become more common causes of unemployment and recessions.

JEL-codes: E62 E65 H21 H31 I18 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-ias, nep-lab and nep-mac
Note: EFG PE
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Published as Christina D. Romer & David H. Romer, 2022. "A Social Insurance Perspective on Pandemic Fiscal Policy: Implications for Unemployment Insurance and Hazard Pay," Journal of Economic Perspectives, vol 36(2), pages 3-28.

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