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Title: Unemployment Accounts and Employment Incentives

Author(s): Alessio J G Brown, Mike Orszag and Dennis J. Snower

Publication Date: June 2006

Keyword(s): employment, redistribution, unemployment, unemployment accounts and unemployment benefits

Programme Area(s): Labour Economics and Public Economics

Abstract: We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UA) system. Under the UA system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.

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Bibliographic Reference

Brown, A, Orszag, M and Snower, D. 2006. 'Unemployment Accounts and Employment Incentives'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5692