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Civic Virtue and Labor Market Institutions

Yann Algan () and Pierre Cahuc

Sciences Po publications from Sciences Po

Abstract: We argue civic virtue plays a key role in explaining the design of public insurance against unemployment risks by solving moral hazard issues which hinder the efficiency of unemployment insurance. We show, in a simple model, that economies with stronger civic virtues are more prone to provide insurance through unemployment benefits rather than through job protection. We provide cross-country empirical evidence of a strong correlation between civic attitudes and the design of unemployment benefits and employment protection in OECD countries over the period 1980 to 2003. We then use an epidemiological approach to estimate the existence of a potential causal relationship from inherited civic virtue to labor market insurance institutions.

JEL-codes: J41 J65 J68 Z13 (search for similar items in EconPapers)
Date: 2009-01
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Published in American Economic Journal: Macroeconomics, 2009, vol. 1, pp.111-145

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Working Paper: Civic Vitue and Labor Market Institutions (2009)
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