How do politicians save? Buffer-stock management of unemployment insurance finance

Steven Craig, Wided Hemissi, Satadru Mukherjee and Bent Sorensen

Journal of Urban Economics, 2016, vol. 93, issue C, 18-29

Abstract: We fit an empirical structural model of forward looking government savings behavior to data from the U.S. state Unemployment Insurance (UI) programs 1976–2008. States increase benefits or lower taxes when Unemployment Trust fund balances are high, consistent with a desired target level of savings. This can be explained by the representative state program behaving like a Carroll (1992) buffer-stock consumer who trades off a desire to expend savings (impatience) against the fear of running out of funds (risk aversion). We calibrate the model to the data and find that statistics from model simulations match similar statistics produced from the data for reasonable levels of risk aversion and impatience.

Keywords: Government savings; Unemployment insurance; Impatience; Prudence (search for similar items in EconPapers)
JEL-codes: E21 H11 H74 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Working Paper: How Do Politicians Save? Buffer Stock Management of Unemployment Insurance Finance (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:93:y:2016:i:c:p:18-29

DOI: 10.1016/j.jue.2016.02.002

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