Risk Protection and Redistribution in the Design of Social Insurance

Rory McGee and Martin O'Connell

No 19989, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how heterogeneity in employment risk and income loss exposure shapes the social value of expanding unemployment insurance (UI) generosity. We estimate individual willingness-to-pay (WTP) for UI reforms, capturing both insurance value and cross-subsidization. WTP to expand U.S. UI peaks among lower income households, who are subsidized by others under the current system. We decompose the social value into gains from risk protection ($0.43 per benefit dollar) and redistribution through cross-subsidization ($0.10), net of incentive costs (-$0.71). Surplus redistribution raises the gains by 31%, split across (20%) and within (11%) income groups.

JEL-codes: E21 E24 H23 H31 H50 I38 J65 (search for similar items in EconPapers)
Date: 2025-03
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