From Unemployment Benefits to Unemployment Accounts

23 Pages Posted: 21 Aug 2002

See all articles by J. Michael Orszag

J. Michael Orszag

Willis Towers Watson - Reigate (Surrey Office); Institute for the Study of Labor (IZA)

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2002

Abstract

We explore the implications of replacing current unemployment benefit (UB) systems by unemployment accounts (UA). Under the UA system, employed people would be required to make ongoing contributions to their unemployment accounts, and the balances in these accounts would then be available to them during periods of unemployment. The government would be able to undertake balanced-budget redistributions among the UAs, taxing the contributions of the rich and subsidizing those of the poor. When people retire, they could use their remaining UA balances to top up their pensions. Under the unemployment benefit system, people are in effect rewarded for being unemployed (through the unemployment benefits) and penalized for being employed (through the taxes that finance the unemployment benefits). The UA system alleviates these externality problems. For when an unemployed person makes withdrawals from his UA, he is thereby diminishing the amount of funds that are available to him later on.

Keywords: Unemployment Benefits, Unemployment Accounts, Redistribution, Employment, Unemployment, Pensions

JEL Classification: J23, J32, J38, J64, J65, J68

Suggested Citation

Orszag, J. Michael and Snower, Dennis J., From Unemployment Benefits to Unemployment Accounts (July 2002). Available at SSRN: https://ssrn.com/abstract=323563

J. Michael Orszag

Willis Towers Watson - Reigate (Surrey Office) ( email )

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Reigate, Surrey, RH2 9PQ
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Institute for the Study of Labor (IZA)

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

Dennis J. Snower (Contact Author)

University of Kiel - Institute for World Economics (IfW) ( email )

Duesternbrooker Weg 120
D-24118 Kiel
Germany
+49+431-8814-235 (Phone)

Institute for the Study of Labor (IZA)

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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