Working Paper
Designing Unemployment Insurance for Developing Countries
Abstract: The benefits of implementing Unemployment Insurance Savings Accounts (UISAs) are studied in the presence of the multiple sources of information frictions often existing in developing countries. A benchmark incomplete markets economy is calibrated to Mexico in the early 2000s. The unconstrained optimal allocation would imply very large welfare gains relative to the benchmark economy (similar to an increase in consumption of 23% in every period). More importantly, in presence of multiple sources of information frictions, about half of those potential gains can be accrued through the implementation of UISAs with replacement rates between 40-50%, contribution rates between 10-15%, an initial liquidity transfer of about 20 quarters of average income, and higher payroll taxes to finance those initial stocks.
JEL Classification: D82; H55; I38; J65;
https://doi.org/10.20955/wp.2018.006
Status: Published in Journal of Development Economics
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Bibliographic Information
Provider: Federal Reserve Bank of St. Louis
Part of Series: Working Papers
Publication Date: 2018-04-16
Number: 2018-6
Note: Publisher DOI: https://doi.org/10.1016/j.jdeveco.2020.102565
Related Works
- Working Paper Revision (2020-09-10) : Designing Unemployment Insurance for Developing Countries
- Working Paper Original (2018-04-16) : You are here.