Labour Market Effects of Unemployment Accounts: Insights from Behavioural Economics

This article reconsiders the behavioural effects of replacing the existing unemployment insurance system with unemployment accounts (UAs). Under this alternative system, workers are required to save a fraction of their wage in special accounts, whereas the unemployed are allowed to withdraw savings...

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Bibliographic Details
Published inCESifo economic studies Vol. 57; no. 4; pp. 581 - 604
Main Authors van Huizen, Thomas, Plantenga, Janneke
Format Journal Article
LanguageEnglish
Published Oxford Oxford University Press 01.12.2011
SeriesCESifo Economic Studies
Subjects
Behavioural economics
Economic models
Economic theory
Labor economics
Labour market
Psychological aspects
Public policy
Unemployment
Unemployment duration
Unemployment insurance
Western Europe
Workers
Europe
underlying principles
labour economics policies
Unemployment insurance
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Summary:This article reconsiders the behavioural effects of replacing the existing unemployment insurance system with unemployment accounts (UAs). Under this alternative system, workers are required to save a fraction of their wage in special accounts, whereas the unemployed are allowed to withdraw savings from these accounts. Previous studies argued that such a reform will improve employment incentives considerably and thereby lead to a dramatic decrease in unemployment levels and durations. We show that this expected impact hinges critically on the assumptions on time preferences. Using recent insights from behavioural economics, we demonstrate that the theoretical impact of UAs is ambiguous rather than substantially positive. (JEL codes: D03, J64, J65)
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1610-241X
1612-7501
DOI:10.1093/cesifo/ifr021