Working Paper: CEPR ID: DP7632
Authors: Gonzalo Reyes; Jan C. van Ours; Milan Vodopivec
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 benefits. Our results provide strong support to the idea that UISAs can improve work incentives.
Keywords: savings account; unemployment duration; unemployment insurance
JEL Codes: C41; H55; J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| amount of savings in UISAs (D14) | probability of exiting unemployment (J64) |
| using Solidarity Fund (SF) (G23) | probability of exiting unemployment (J64) |
| amount accumulated in UISAs (G23) | exit rate from unemployment (J65) |
| amount of savings in UISAs (D14) | work incentives (J33) |
| duration dependence pattern (C41) | exit rate from unemployment (J65) |
| relying solely on UISAs (J65) | pattern of job finding rates (J68) |