 Unemployment Insurance and Unemployment Accounts: The Best of Both WorldsJournal of the European Economic Association, 2017, vol. 15, issue 6, 1302-1340 Abstract: Unemployment accounts are mandatory individual savings accounts that can be used only during unemployment or retirement. Unlike unemployment insurance, unemployment accounts solve the moral hazard problem but provide no public insurance to workers. I study a hybrid system that borrows from concepts of both unemployment insurance and unemployment accounts, in which workers are mandated to save when employed and can withdraw from the account when unemployed. Once the account is exhausted, the unemployed worker receives unemployment benefits. This hybrid policy provides insurance to workers more efficiently than an unemployment insurance system because it provides government benefits selectively. As a consequence, young workers can reduce their precautionary savings and better smooth their consumption over the life cycle. Calibrating the model to the US economy, I find that, relative to an optimal unemployment insurance system, the optimal hybrid policy leads to a welfare gain of 2.4%, measured as consumption equivalent variation. JEL-codes: E24 E61 J64 J65 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:15:y:2017:i:6:p:1302-1340. Access Statistics for this article Journal of the European Economic Association is currently edited by Romain Wacziarg More articles in Journal of the European Economic Association from European Economic Association |
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