EconPapers    
Economics at your fingertips  
 

Risk-Based Selection in Unemployment Insurance: Evidence and Implications

Camille Landais, Arash Nekoei, Peter Nilsson, David Seim and Johannes Spinnewijn

American Economic Review, 2021, vol. 111, issue 4, 1315-55

Abstract: This paper studies whether adverse selection can rationalize a universal mandate for unemployment insurance (UI). Building on a unique feature of the unemployment policy in Sweden, where workers can opt for supplemental UI coverage above a minimum mandate, we provide the first direct evidence for adverse selection in UI and derive its implications for UI design. We find that the unemployment risk is more than twice as high for workers who buy supplemental coverage. Exploiting variation in risk and prices, we show how 25–30 percent of this correlation is driven by risk-based selection, with the remainder driven by moral hazard. Due to the moral hazard and despite the adverse selection we find that mandating the supplemental coverage to individuals with low willingness-to-pay would be suboptimal. We show under which conditions a design leaving choice to workers would dominate a UI system with a single mandate. In this design, using a subsidy for supplemental coverage is optimal and complementary to the use of a minimum mandate.

JEL-codes: D82 G22 J65 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20180820 (application/pdf)
https://doi.org/10.3886/E127541V1 (text/html)
https://www.aeaweb.org/doi/10.1257/aer.20180820.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20180820.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Risk-based selection in unemployment insurance: evidence and Implications (2021) Downloads
Working Paper: Risk-based selection in unemployment insurance: evidence and implications (2017) Downloads
Working Paper: Risk-based Selection in Unemployment Insurance: Evidence and Implications (2017) Downloads
Working Paper: Risk-based Selection in Unemployment Insurance: Evidence and Implications (2017) Downloads
Working Paper: Risk-based selection in unemployment insurance: evidence and implications (2017) Downloads
Working Paper: Risk-based selection in unemployment insurance: evidence and implications (2017) Downloads
Working Paper: Risk-based selection and unemployment insurance: evidence and implications (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:111:y:2021:i:4:p:1315-55

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20180820

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2025-03-31
Handle: RePEc:aea:aecrev:v:111:y:2021:i:4:p:1315-55