Incentive Effects of Unemployment Insurance Savings Accounts

Evidence from Chile

G.R. Hartley, J.C. van Ours, M. Vodopivec

Research output: Working paperDiscussion paperOther research output

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Abstract

This study examines the determinants of job-finding rates of unemployment benefit recipients under the Chilean program. This is a unique, innovative program that combines social insurance through a solidarity fund (SF) with self-insurance in the form of unemployment insurance savings accounts (UISAs) - so as to mitigate the moral hazard problem of traditional unemployment insurance programs. Our study is the first one to empirically investigate whether UISAs improve work incentives. We find that for beneficiaries using the SF, the pattern of job finding rates over the duration of unemployment is consistent with moral hazard effects, while for beneficiaries relying on UISAs, the pattern is free of such effects. We also find that for benefit recipient not entitled to use the SF, the amount of accumulation on the UISA does not affect the exit rate from unemployment, suggesting that such individuals internalize the costs of unemployment benefts. Our results provide strong support to the idea that UISAs can improve work incentives.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages35
Volume2010-04
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper
Volume2010-04

Fingerprint

Unemployment insurance
Chile
Incentive effect
Savings
Solidarity
Unemployment
Moral hazard
Work incentives
Duration of unemployment
Self-insurance
Exit
Social insurance
Unemployment benefits
Costs

Keywords

  • Unemployment insurance
  • unemployment duration
  • savings accounts

Cite this

Hartley, G. R., van Ours, J. C., & Vodopivec, M. (2010). Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile. (CentER Discussion Paper; Vol. 2010-04). Tilburg: Microeconomics.
Hartley, G.R. ; van Ours, J.C. ; Vodopivec, M. / Incentive Effects of Unemployment Insurance Savings Accounts : Evidence from Chile. Tilburg : Microeconomics, 2010. (CentER Discussion Paper).
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Hartley, GR, van Ours, JC & Vodopivec, M 2010 'Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile' CentER Discussion Paper, vol. 2010-04, Microeconomics, Tilburg.

Incentive Effects of Unemployment Insurance Savings Accounts : Evidence from Chile. / Hartley, G.R.; van Ours, J.C.; Vodopivec, M.

Tilburg : Microeconomics, 2010. (CentER Discussion Paper; Vol. 2010-04).

Research output: Working paperDiscussion paperOther research output

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T1 - Incentive Effects of Unemployment Insurance Savings Accounts

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AB - This study examines the determinants of job-finding rates of unemployment benefit recipients under the Chilean program. This is a unique, innovative program that combines social insurance through a solidarity fund (SF) with self-insurance in the form of unemployment insurance savings accounts (UISAs) - so as to mitigate the moral hazard problem of traditional unemployment insurance programs. Our study is the first one to empirically investigate whether UISAs improve work incentives. We find that for beneficiaries using the SF, the pattern of job finding rates over the duration of unemployment is consistent with moral hazard effects, while for beneficiaries relying on UISAs, the pattern is free of such effects. We also find that for benefit recipient not entitled to use the SF, the amount of accumulation on the UISA does not affect the exit rate from unemployment, suggesting that such individuals internalize the costs of unemployment benefts. Our results provide strong support to the idea that UISAs can improve work incentives.

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BT - Incentive Effects of Unemployment Insurance Savings Accounts

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CY - Tilburg

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Hartley GR, van Ours JC, Vodopivec M. Incentive Effects of Unemployment Insurance Savings Accounts: Evidence from Chile. Tilburg: Microeconomics. 2010. (CentER Discussion Paper).