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Unemployment Insurance with Response Heterogeneity

Author

Listed:
  • Wunsch, Conny

    (University of Basel)

  • Zabrodina, Véra

    (University of Basel)

Abstract
The generosity of social insurance coverage often increases with the beneficiary's age and their contribution time to social security, but existing policies vary considerably. We study the differentiation of unemployment insurance (UI) generosity by evaluating how the insurance-incentive trade-off varies with age and contribution time. We exploit numerous discontinuities in potential benefit duration in Germany. Contribution time in the last three years carries information on job search efforts, as it is associated with lower moral hazard responses and fiscal externality. We find no significant response heterogeneity in age or longer contribution time horizons. Contrasting these gradients with an approximated insurance value for four UI regimes, we document that steepening the potential benefit duration schedule in contribution time and flattening it in age would have increased welfare.

Suggested Citation

  • Wunsch, Conny & Zabrodina, Véra, 2023. "Unemployment Insurance with Response Heterogeneity," IZA Discussion Papers 16509, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16509
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    policy differentiation; response heterogeneity; unemployment insurance;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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