On the design of a European Unemployment Insurance System

Árpád Ábrahám, Joao Brogueira de Sousa, Ramon Marimon and Lukas Mayr

European Economic Review, 2023, vol. 156, issue C

Abstract: We study the welfare effects of both existing and counter-factual European unemployment insurance (UI) policies using a rich multi-country dynamic general equilibrium model with labour market frictions. The model successfully replicates several salient features of European labour markets, in particular the cross-country differences in the flows between employment, unemployment and inactivity, as a result of labour market and UI policy differences across euro area countries. We find that mechanisms like the recently introduced instrument for temporary support to mitigate unemployment risks in an emergency (SURE), which allows national governments to borrow at low interest rates to cover expenditures on unemployment risk, yield sizeable welfare gains. Furthermore, we find that, in spite of the calibrated heterogeneity across euro area countries, there is a common direction in which they can improve their UI policies; in particular, a harmonized benefit system that features a one-time payment of around three quarters of income upon separation is welfare improving in all euro area countries relative to the status quo.

Keywords: Labour markets; Unemployment insurance; Job creation; Job destruction; Risk-sharing (search for similar items in EconPapers)
JEL-codes: E2 J6 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: On the Design of a European Unemployment Insurance System (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:156:y:2023:i:c:s0014292123000983

DOI: 10.1016/j.euroecorev.2023.104469

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