Measuring Unemployment Insurance Generosity

CIRPEE Working Paper 09-21

28 Pages Posted: 24 Jun 2009

See all articles by Stephane Pallage

Stephane Pallage

University of Quebec at Montreal - Department of Economics; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Lyle A. Scruggs

University of Connecticut - Department of Political Science

Christian Zimmermann

Federal Reserve Bank of Saint Louis; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 23, 2009

Abstract

Unemployment insurance policies are multidimensional objects. They are typically defined by waiting periods, eligibility duration, benefit levels and asset tests when eligible, which make intertemporal or international comparisons difficult. To make things worse, labor market conditions, such as the likelihood and duration of unemployment matter when assessing the generosity of different policies. In this paper, we develop a methodology to measure the generosity of unemployment insurance programs with a single metric. We build a first model with such complex characteristics. Our model features heterogeneous agents that are liquidity constrained but can self-insure. We then build a second model that is similar, except that the unemployment insurance is simpler: it is deprived of waiting periods and agents are eligible forever with constant benefits. We then determine which level of benefits in this second model makes agents indifferent between both unemploymnet insurance policies. We apply this strategy to the unemployment insurance program of the United Kingdom and study how its generosity evolved over time.

Keywords: social policy, generosity, unemployment insurance, measurement

JEL Classification: E24, J65

Suggested Citation

Pallage, Stephane and Scruggs, Lyle A. and Zimmermann, Christian, Measuring Unemployment Insurance Generosity (June 23, 2009). CIRPEE Working Paper 09-21, Available at SSRN: https://ssrn.com/abstract=1424388 or http://dx.doi.org/10.2139/ssrn.1424388

Stephane Pallage (Contact Author)

University of Quebec at Montreal - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
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Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

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Ste-Foy, Quebec G1K 7P4
Canada

Lyle A. Scruggs

University of Connecticut - Department of Political Science ( email )

365 Fairfield Way, U-1024
Storrs, CT 06269-1024
United States

Christian Zimmermann

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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