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UID:b48896fccb1d2ec6f1dbe092cf34023a
CATEGORIES:Seminars
CREATED:20170421T181324
SUMMARY:Johannes Spinnewijn - London School of Economics
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Risk-based Selection in Unemployment Insurance: Evidence and Implications (
 with C Landais, A Nekoei, P Nilsson and D Seim)\nAbstract:\n Despite the la
 rge existing literature on unemployment insurance (UI), the fundamental que
 stion why it is mandated, with no coverage choice available, remains unansw
 ered. While adverse selection has long been recognized as hindering efficie
 nt market function, to date no direct evidence exists in the UI context and
  the desirability of a UI mandate is untested. Building on the unique insti
 tutional setting of Sweden, where workers can buy supplemental UI coverage 
 above a minimum mandate, we provide the first direct evidence for risk-base
 d selection in UI and of its implication for the design of social insurance
  against unemployment risk. First, we document a strong correlation between
  unemployment risk and the choice of buying supplemental coverage (with sem
 i-elasticities around 1), even after controlling for a rich set of observab
 les. Second, exploiting unique individual level variation in risk, we provi
 de evidence for substantial risk-based selection, controlling for moral haz
 ard. Third, using unique variation in the price of UI, we document that the
  average cost of UI increases with the price of UI. Despite the severe adve
 rse selection, we find that the offered choice welfare-dominates mandating 
 the supplemental coverage. We cannot reject that the subsidy for supplement
 al coverage is set optimally. We also explore the complementarity between t
 he subsidy and mandating a minimum coverage level.\n
DTSTAMP:20260406T115013Z
DTSTART:20161114T173000Z
DTEND:20161114T190000Z
SEQUENCE:0
TRANSP:OPAQUE
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