Unemployment Insurance and Cultural Transmission: Theory and Application to European Unemployment

Jean-Baptiste Michau

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper emphasizes the two-way causality between the provision of unemployment insurance and the cultural transmission of work ethic. Values affect the size of the moral-hazard problem and, hence, the policy to be implemented. Conversely, when parents rationally choose how much effort to exert to raise their children to work hard, they form expectations on the policy that will be implemented by the next generation. In this context, I determine the dynamics of preferences across generations and show that the different cultural traits, i.e. high and low work ethics, are complementary. The model could generate a lag between the introduction of unemployment insurance and a deterioration of the work ethic. Relying on a calibration, I argue that it can account for a substantial fraction of the history of European unemployment since World War II. As this explanation is compatible with the co- existence of generous unemployment insurance and low unemployment in the 1950s and 1960s, it could be seen as an alternative to the dominant story that relies on the occurrence of large shocks since the 1970s. Supportive empirical evidence is provided.

Keywords: cultural transmission; European unemployment; unemployment insurance; work ethic (search for similar items in EconPapers)
JEL-codes: E24 H31 J65 Z10 (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-ias, nep-lab, nep-ltv and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: UNEMPLOYMENT INSURANCE AND CULTURAL TRANSMISSION: THEORY AND APPLICATION TO EUROPEAN UNEMPLOYMENT (2013)
Working Paper: Unemployment insurance and cultural transmission: theory and application to European unemployment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0936

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