Castro-Fernandez, Rodriguo and Wodon, Quentin (2002): Protecting the Unemployed in Chile: From State Assistance to Individual Insurance? Published in: Chile’s High Growth Economy: Poverty and Income Distribution 1987-1998, World Bank Country Study, Washington, DC (2002): pp. 190-213.
Download (1MB) | Preview
The weaknesses of traditional policies for dealing with unemployment shocks have placed the reform of social insurance programs at the center of the public policy debate. Unemployment insurance saving accounts (UISAs) have been proposed as an instrument to protect workers from the loss in earnings associated with unemployment. The idea is to have all workers (and possibly their employers as well) deposit a share of their monthly incomes into their UISA, with the balance in the account accruing market interest rates. During an unemployment spell, the workers who would be eligible to do so could withdraw funds from their individual account. It is only when there would be no or few funds left in the account that complementary unemployment assistance allowances would be provided. The fact that the accounts are individualized helps to solve the moral hazard problem. Moreover, the fact that the contribution system is mandatory also helps to solve another problem, namely the adverse selection mechanisms through which only some workers might choose to self-insure, or through which the private insurance firms insuring workers would try to hand-pick those workers with the lowest risk of being unemployed. Overall, the objective of UISAs is to set incentives right. Recent proposals for replacing standard forms of unemployment assistance by UISAs are being implemented in several Latin American countries. This paper explores some of the implications of replacing in Chile the current job security system with UISAs.
|Item Type:||MPRA Paper|
|Original Title:||Protecting the Unemployed in Chile: From State Assistance to Individual Insurance?|
|Keywords:||Chile; unemployment insurance savings account|
|Subjects:||I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor
|Depositing User:||Quentin Wodon|
|Date Deposited:||26. May 2009 00:07|
|Last Modified:||12. Feb 2013 09:56|
Andolfatto, D. and P. Gomme. “Unemployment Insurance and Labor Market Activity in Canada”. Carnegie-Rochester Conference Series on Public Policy. 44. 1996.
Alvarez, F. and M. Veracierto. “Search,Self-Insurance and Job-Security Provisions”. mimeo. Department of Economics, University of Chicago. 1998.
Anderson, P.M. and B.D. Meyer. “Unemployment Insurance in the United States: Layoff Incentives and Cross-Subsidies”. Journal of Labor Economics. 11. 1993.
Beyer, H. “Seguro de Desempleo: Elementos para la Discusion”. Puntos de Referencia 222. Centro de Estudios Publicos. March 2000.
Brown, E. and H. Kaufold. “Human Capital Accumulation and the Optimal Level of Unemployment Insurance Provision”. Journal of Labor Economics. 6. 1988.
Coloma, F. “Seguro de Desempleo: Teoria, Evidencia y una Propuesta”. Documento de Trabajo, Universidad Catolica. 1993
Coloma, F. “Seguro de Desempleo: Analisis y Propuesta”. Puntos de Referencia 221. Centro de Estudios Publicos. March 2000.
Cortazar, R. , C. Echeverria and P. Gonzalez. “Hacia un Nuevo Diseno de Sistemas de Proteccion de Cesantes” Coleccion Estudios CIEPLAN No. 40. March 1995.
Costain, J. S. “Unemployment Insurance with Endogenous Search Intensity and Precautionary Saving”. Working Paper No. 243. Department of Economics, Universitat Pompeu Fabra. 1999.
Chiu, W. H. and E. Karni. “Endogenous Adverse Selection and Unemployment Insurance”. Journal of Political Economy. 106. 1998.
Davidson, C. and S. A. Woodbury. “Optimal Unemployment Insurance”. Journal of Public Economics. 64. 1997.
Feldstein, M. and D. Altman. “Unemployment Insurance Savings Accounts”. NBER Working Paper 6860. 1998.
Fredriksson, P. and B. Holmlund. “Optimal Unemployment Insurance in Search Equilibrium”. mimeo. Department of Economics. Uppsala University. 1998.
Green, D.A. and W.C. Riddell. “The Economic Effects of Unemployment Insurance in Canada: An Empirical Analysis of Unemployment Insurance Disentitlement”. Journal of Labor Economics. 11. 1993.
Gruber, J. “The Consumption Smoothing Benefits of Unemployment Insurance”. American Economic Review. 87. 1997.
Guasch, J. “An Alternative to Traditional Unemployment Insurance Programs: A Liquidity-Based Approach Against the Risk of Earning Losses”. Mimeo, World Bank. 2000.
Hansen, G. D. and A. Imrohoroglu. “The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard”. Journal of Political Economy. 100. 1992.
Hausmann, R. and H. Reisen. “Securing Stability and Growth in Latin America: Policy Issues and Prospects for Shock-Prone Economies”. OECD. 1996.
Hopenhayn, H. A. and J. P. Nicolini. “Optimal Unemployment Insurance”. Journal of Political Economy. 105. 1997.
Hopenhayn, H. A. and J. P. Nicolini. “Optimal Unemployment Insurance and Employment History”. Unpublished manuscript. November 1999.
Hopenhayn, H. A. “Unemployment Insurance Savings Accounts: Optimal?”. University of Rochester and Universidad Torcuato Di Tella. Mimeo. February 2000.
Meyer, B. D. “Unemployment Insurance and Unemployment Spells”. Econometrica. 58. 1990.
Mizala, A and P. Romaguera. “Seguro de Desempleo y Flexibilidad del Mercado Laboral: Evaluacion de la Experiencia Chilena y Analisis de Sistemas Alternativos”. Informe Fondecyt, mimeo 1993.
Mizala, A, P. Romaguera and . Henriquez. “Oferta Laboral y Seguro de Desempleo: Estimaciones para la Economia Chilena” Serie Economia No. 28, Centro de Economia Aplicada, Departamento de Ingenieria Industrial. Universidad de Chile. Jan. 1998
Orszag, J. and D. Snower. “From Unemployment Benefits to Unemployment Accounts”. Birkbech College, London. Mimeo. 1997.
Pallage, S. and C. Zimmermann. “Moral Hazard and Optimal Unemployment Insurance in an Economy with Heterogeneous Skills”. Working Paper No. 54, CREFE, Universite du Quebec a Montreal. 1997.
Paredes, R. “Reflexiones en torno al Proyecto de Seguro de Desempleo” mimeo, Departamento de Economia, Universidad de Chile. 2000.
Usami, Y. “Payroll-Tax Financed Unemployment Insurance with Human Capital”. Ph.D. dissertation, MIT. 1983.
Valdivia, V. “Policy Evaluation in Heterogeneous Agent Economies: The Welfare Impact of Unemployment Insurance”. PhD Thesis. Department of Economics, Northwestern University. 1996.
Wang, C. and S. Williamson. “Unemployment Insurance with Moral Hazard in a Dynamic Economy”. Carnegie-Rochester Conference Series on Public Policy. 44. 1996.
Zhang, G-J. “Unemployment Insurance Analysis in a Search Economy”. Department of Economics, University of Guelph, Canada. Mimeo. 1996.