Publication

This paper explores the far-reaching implications of replacing unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs 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 authors present an analytical framework to analyze the incentive effects of UAs and calibrate a model for the high unemployment countries of Europe. Their 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.