Savings for Unemployment in Good or Bad Times: Options for Developing Countries

41 Pages Posted: 9 Nov 2009

See all articles by David A. Robalino

David A. Robalino

World Bank

Milan Vodopivec

World Bank - Human Development Network; IZA Institute of Labor Economics

Andras Bodor

Georgetown University

Abstract

The paper describes and evaluates unemployment insurance savings accounts (UISAs) – a relatively new and not well-known way of providing unemployment benefits. The UISAs reduce work disincentives by allowing recipients to keep their own unused unemployment contributions, and offer the possibility to extend coverage to informal sector workers. In addition, if integrated with mandatory pension systems (and even social pensions), UISAs can be rapidly deployed and at a low cost, thus becoming a realistic tool to protect workers from the effects of the financial crisis. Even during normal times, the integration with the pension system – and social security in general – would give more flexibility to individuals in the management of short and long term savings (i.e., pension wealth) while avoiding unnecessary administrative costs. The paper discusses issues related to incentives, redistribution, and viability, and outlines a policy framework for design and implementation. It argues that the UISAs system is especially attractive for developing countries, where the "self-policing" nature of the system is particularly important given a much larger informal sector and weaker administrative capacity in comparison to developed countries.

Keywords: unemployment insurance, unemployment insurance savings accounts, unemployment

JEL Classification: J65, J68

Suggested Citation

Robalino, David A. and Vodopivec, Milan and Bodor, Andras, Savings for Unemployment in Good or Bad Times: Options for Developing Countries. IZA Discussion Paper No. 4516, Available at SSRN: https://ssrn.com/abstract=1501932

David A. Robalino (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Milan Vodopivec

World Bank - Human Development Network ( email )

1818 H Street, NW
Washington, DC 20433
United States

IZA Institute of Labor Economics

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

Andras Bodor

Georgetown University ( email )

Washington, DC 20057
United States

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